Today’s post comes courtesy of Kate Bregovic. Have you ever thought about making a little extra cash by offering home warranties to your real estate clients? Kate will show you how it’s done!
Can You Make Money Selling Home Warranties?
It’s true that there is a lot of controversy regarding home warranties. Many people question whether they are really worth the money. However, data from surveys shows that home buyers definitely appreciate this type of protection. On average, a home with a warranty sells not only 11 days faster, but also for $2,300 more. The cost of a warranty contract itself is around $600. Therefore, benefits to the seller are obvious. And so are the benefits to a realtor, who might also be able to get extra income from home warranty commissions.
But if you want to start doing this kind of side hustle, you need to learn some important things first.
What Are Home Warranties?
Home warranties are service contracts that offer coverage to a wide range of home systems and appliances. If any of the covered items break down while the contract is active, the warranty company should cover the repair costs. It will also deal with the contractors sending the exact type of professionals you need to your door. Therefore, such protection saves the homeowner not only money, but also time. That’s the basic concept of such protection.
Of course, if you plan on offering this type of service to your clients, you’ll need to understand it to the last detail. Therefore, you should start by researching the most basic question of “what is a home warranty?” Then, move on to studying the terms and conditions offered by all top home warranty providers in your area. After all, you’ll need to offer your clients a service that will bring them actual value.
Unfortunately, the home warranty industry is full of scams. So you need to learn how to identify trustworthy providers and how to prove to both buyers and sellers that the contract you offer will truly help them.
Benefits of Home Warranties for Realtors
Realtors are at an advantage when it comes to “promoting” home warranties. It’s because they work with people who are actively searching for safeguards. Buying a home is the biggest purchase of a lifetime for many. Therefore, it’s no surprise people are worried and stressed over this deal. Also, they rarely have the “money cushion” to cover them should anything go wrong with their new property.
That’s why home inspections are mandatory. But even they can’t guarantee that nothing in the building breaks down within a few months. The home warranty is a way to cover the new homeowner if that happens. Usually, this argument alone is enough to motivate people to pay a little bit extra or persuade them to buy the covered home faster.
All things considered, as a realtor, you win some simply from the fact that you make a better deal for your clients. However, there is also the matter of commissions. The majority of home warranty companies offer affiliate programs and partnerships to realtors. In many cases, those carry a commission for every contract you manage to sell on behalf of the company.
The exact terms of such deals vary greatly. For example, American Home Shield, the biggest provider in the industry today, offers a 15% commission rate, along with other perks. Choice Home Warranty, on the other hand, doesn’t advertise the terms of its affiliate program. However, it accepts applications to join rather fast. There are also the “refer a friend” kind of programs that offer a single payout, like $50 per contract from High Tech Home Warranties. But there are also companies like Square Trade Protection Plans, which offer no commission at all.
Is It Legal for a Realtor to Sell Home Warranties?
As a realtor planning to make some extra money by offering this type of service, you’ll need to research affiliate programs as carefully as you do the home warranty contracts. After all, you want to be sure that you work only with providers that are best for your clients and for you.
However, it’s also no less important to learn whether you can get that commission at all. As it turns out, this is not always possible considering the current legislature, or lack thereof.
You see, the problem is that the home warranty industry is poorly regulated. That’s what makes it different from home insurance, which is governed by a dedicated set of laws. The murky legal status of home warranties benefits the providers to some degree. However, it also makes it hard to define the actual standing of these services.
As a realtor, you yourself must comply with a wide range of laws and regulations. Offering a home warranty might be a violation of the Real Estate Settlement Procedures Act. Different states define home warranty services differently. Therefore, you’ll need to find out exactly what legal status this service has in your city.
After this, you should learn the legal status of your “relationship” with the home warranty provider. In the meantime, find out what kind of services you are allowed to offer as a realtor.
Once that is done, think carefully about whether offering home warranties is truly worth it for you. After all, you wouldn’t want to risk doing something that’s technically illegal for a small commission.
