When you’ve put your home on the market, the last thing you need is the breakdown of a major appliance or system that will cost you time and money to fix. Not to mention potentially hurt your house’s purchase price or squash a deal pre-closing.

A seller’s home warranty is one option that can protect you. It pays for the repair or replacement of vital household features. Homebuyers often are advised to get them, especially if they’re purchasing an older or aging property whose appliances date from who knows when. But there are home warranties targeted for home sellers, too. Here’s how they work and the benefits they might bring.

What is a seller’s home warranty?

Home warranties are service contracts that cover the cost of fixing or replacing specific systems and items, as dictated by the agreement. They’re similar to manufacturers’ warranties, except that they offer coverage to a host of things in a house, instead of just one product.

Most home warranties cover major household appliances (ranges, refrigerators, washer/dryers), electrical wiring, plumbing, and heating and air conditioning (HVAC) systems. They typically won’t cover problems pertaining to windows, doors, floors, or other structural features or fixtures, though the level of protection may vary and can be customized.

A seller’s home warranty is a version of this protection. Purchased by the current homeowner, it covers a specific period: the time between the initial listing and the final closing. It’s in force throughout the showings, once the home is in contract and through the home inspection and walk-through, up until the checks and the keys change hands. (And sometimes a bit beyond, since warranties are usually paid for on a month-to-month basis.)

A seller’s home warranty provides financial protection in case anything were to go wrong with a major appliance or system in the home before a sale is finalized. Because it typically covers just a certain time frame, it is sometimes called a limited home warranty. However, it may be limited in another sense, in that it doesn’t offer as many options or cover all the items (especially smaller, freestanding appliances) that regular home warranties often do. There may also be a service charge for the repair person’s actual visit.

What does a seller’s home warranty cost?

Consumer Affairs.com reports that the average home warranty costs between $36 to $68 a month, and can run from $264 to $1,425 per year. Due to their limits, seller’s home warranties skew a little cheaper: averaging around $300 to $600 annually or $25 to $50 per month, according to Angi. Of course, there are a variety of variables to consider, including the provider, the level of coverage, and potential discounts that are available to you. If you are a senior or a military member, you may be able to get a lower rate for your seller’s home warranty, for example.

You may also be able to get the cost of a seller’s home warranty covered for you. Sometimes, home warranty companies won’t charge for a warranty if the seller agrees to purchase a plan for the home’s new owners, or to buy a home warranty plan through the company on their next residence.

In such instances, the cost of the seller’s warranty comes out of the proceeds from the sale of your home. This means it is not technically “free,” of course, but it does mean that you aren’t paying directly for the warranty up front, which can make it more appealing.

Transferring the home warranty

In most cases, a seller’s home warranty is transferable to a buyer. This may incentivize a buyer to make an offer if they can have the peace of mind knowing that if something were to go wrong after they move in, the warranty would cover the cost of repair.

“The seller warranty can convey to the purchaser at closing and cover the new owner through the length of time it was paid for,” explains Amy Cherry Taylor, realtor/associate broker who heads a namesake firm in Fredericksburg, Virginia. “Buyers then have the option to renew it or let it terminate.”

In order to transfer a seller’s home warranty to a buyer, you’ll have to inform the home warranty provider that you would like to change the coverage. They will initiate the transfer of the warranty from the seller to the buyer for the remaining duration of the contract.

The buyer may also be able to extend that coverage for a competitive rate. Some warranty providers charge a small transfer fee, and who pays for that fee will have to be negotiated as part of the transaction.

It is not uncommon for a seller to buy a home warranty for the new homeowner, typically covering the cost for the first year of occupancy. This allows the buyer to feel secure in their purchase and can help to simplify any negotiations that need to take place in order to finish a sale. Sometimes a buyer’s Realtor will also offer to cover the cost of the warranty for them.

Why should a seller buy a home warranty?

Sellers should consider purchasing a seller’s home warranty to provide additional coverage for themselves. If something goes wrong with major appliances or systems, they won’t have to worry about fixing them — spending money on a home they’re looking to unload. It obviously helps should a mishap occur while the home’s being shown, but it’s also useful in case any issues are discovered during the home inspection or happen after an offer has been placed.

“A sellers’ warranty can be an effective selling tool to show the buyer they are purchasing a home with less risk,” Taylor says. “Many purchase contracts are still including limited buyer inspections, even with the transitioning market, so a seller warranty can set your home apart from other active listings.”

Seller’s home warranties can also be an incentive for buyers, who can feel confident that they won’t be left exposed to a sudden and potentially costly malfunction or system failure while they’re closing on a new home. Both sides of the transaction can feel protected during the process, and the protection is easily transferable to keep that extra bit of safety in place after the sale is completed.

True, in buying the seller’s home warranty, you might be spending money on something you’ll never need or use. In a way, its main function is to provide peace of mind throughout the real estate journey — one less thing to stress over in an often stress-filled endeavor.