Home Warranties Help Sellers and Buyers Alike in a Hot Market

Jennifer Gagne

By Jennifer Gagne

Agents representing both buyers and sellers know by now, that the situation in the current housing market is white-hot, but that has a major impact on activity in a number of ways.

As the economy improves, more buyers are flooding the housing market, only to find that inventory is limited. This phenomenon is driving up prices nationwide to some of the highest levels ever observed, and may present unique issues for all involved.

To that end, it’s vital for agents of both sellers (who may then become buyers) and buyers, to ensure their clients are fully protected throughout the sales process and beyond. It’s a best practice of top performing real estate professionals to ensure there is a home warranty on every transaction.

The Current Situation

In Minnesota, the number of new listings inventory of homes fell 17.3 percent on an annual basis through the end of May, according to the Minnesota Association of REALTORS®. Over that same time period, home prices rose 6.3 percent, and things may only be heating up. The year-to-date price increase for the state actually increased 6.8 percent from the 2016 number, and at this point properties are being sold in an average of just 51 days.

Moreover, experts believe this trend is going to continue for a while to come, to the point that it’s hard to predict when the national market – let alone local ones – will cool down.

Emerging Issue

The problem for many would-be sellers and buyers is that the improving economy has put huge numbers of people in a position to buy in the past year, but the low interest rate environment seen in recent years is a big factor in discouraging homeowners to put their properties up for sale, according to CNNMoney.

Often, sellers or their agents may not feel a home warranty is a necessary expense, simply because the competition for properties is so strong right now. When there are multiple offers coming in above asking, and homes are going from on-the-market to sold in less than two months – as opposed to the previous norms – even a small added expense may not be high on the priority list.

However, the level of financial protection home warranties provide often can’t be matched in any other way, according to one of the largest online real estate marketplace company. Put another way – markets change, but that does not change the sellers’ risk during and after closing.

Even despite the shorter listing period, agents should want to make sure seller clients have limited out-of-pocket expenses if major systems or appliances need to be repaired or replaced in addition to peace of mind after closing. Having the warranty at time of listing also ensures agents are in the driver seat on the company and coverage being selected. Moreover, it may be possible to leverage that warranty to reduce any other seller concessions that might arise during contingency periods.

What About Buyers

On the flip side of this equation, buyers’ agents may be hesitant to include warranties in their initial offers for other reasons, including keeping the sales price down. But even after initial offers are accepted, buyers may still be able to include home warranties at other points in the sales process, including around the time of a home inspection or even at closing.

The reason this may be so valuable to would-be buyers is that the competition in the market today necessarily drives up prices. Adding in the relatively low cost of a home warranty may provide additional financial cover in the event of systems or appliance failures that would otherwise cost lots of money – which buyers may no longer have after a bidding war – to deal with.

Keeping Everyone Happy

With the heated competition among buyers for just about any property that’s put up for sale, it’s vital for agents to ensure both sides of the equation get as much financial certainty as they can, and home warranties can play a big role in that, according to RISMedia.

With this in mind, the more agents can do to educate sellers and buyers about how home warranties keep all involved protected throughout and after the real estate sales process, the more likely they will be to enthusiastically welcome such protection.

Contact Jennifer Gagne to learn more about how HMS can help save your clients’ money. Call her at (612) 267-7340 or email her at jgagne@hmsnational.com. Gagne, a seasoned REALTOR, joined HMS Home Warranty in March 2011. A reason for her success as a REALTOR was the inclusion of a home warranty in over 90 percent of her transactions. She enjoys educating brokers and agents on how an HMS Home Warranty increases client satisfaction and builds repeat and referral business.