Are Home Warranties Worth It? A Study in the Richmond Housing Market

Justin Contat and Bennie Waller

Journal of Housing Research, 2020, vol. 29, issue 1, 1-19

Abstract: We are the first to show that home warranties are beneficial by providing a valuable form of insurance to home buyers, which home sellers then (partially) extract in the form of price premiums and faster sales. The benefits of offering a home warranty differ among homes, with older homes tending to receive larger price premiums and lower-priced homes tending to sell faster. For the average home in our data that is priced at $236,000 and 28 years old, offering a home warranty is associated with a price premium of at least $4,000 and a reduction in time on market of at least 2.5 days. Additionally we find some evidence of principal-agent conflicts in the home warranty market.

Date: 2020
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DOI: 10.1080/10527001.2020.1832858

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