Why Should a Real Estate Rehabber Give a Homeowner A Warranty?

Why Should a Real Estate Rehabber Give a Homeowner A Warranty?


Most real estate rehabbers want to finish their rehab of a character and sell it as quickly as possible to make their profit. That’s understandable because of the carrying costs of the character and the money that is “stagnant” until the character is sold. Selling the character often comes down to the quality of the rehab job and the comfort level of the buyer with the buy of an older character that could have problems later.

To conquer any problematic issues of the rehab, knowledgeable rehabbers are giving buyers at the minimum two types of home warranties. The costs of these warranties can be easily controlled and in one case there is truly no out-of-pocket cost.

In the first case, the rehabber can go online to internet sites that sell home warranties. These warranties can cover basic appliances in the character all the way up to plumbing and electrical problems. The cost of these “insurance” policies varies with the benefits received. If the rehabber purchased new appliances for the character, each appliance will have its own manufacturer’s warranty so no additional warranty for these appliances would be needed.

In a character where the rehabber is doing a quick patch and paint and the original appliances are staying, an appliance warranty may be a good investment. People buy homes because of their emotions, not because owning a home makes good business sense. To be able to move into a character essentially “carefree” and not skip a beat in the buyer’s life is what 99% of buyers want.

The cost of these warranties varies from less than $200 to $600 depending on the length of the policy and coverage of items or mechanical systems (HVAC, plumbing and electrical). The prospective homeowner could buy a policy for each of the mechanical systems and appliances, but most will not. They wait for something to happen and pay the more expensive repair costs.

At first, it may not seem logical for a rehabber to put an additional $500 into a character for a warranty, but the advertising assistance is many times this amount. If I choose not to put any more money in the rehab, but want to get the advertising assistance, I simply advertise “Warranty obtainable”. This method that I give the buyer an option to buy the warranty themselves and I add it into the buy price. This is for buyers who have any concerns about not having new appliances or new mechanical systems in the character. If faced with purchasing the warranty themselves, they seldom want to pay for it.

In addition, or as a substitute to the above warranty, I offer the buyer the second form of warranty I mentioned. This is a six-week “fix anything” warranty where I personally take care of any problems myself. The terms of this self-insured policy must be in writing and must exclude the appliances and anything that you, as a rehabber, did not fix yourself.

In hundreds of rehabs that I have done and where I have given buyers this warranty, I have never had one callback. If the rehabber does his job correctly in the first place, he should have few or no problems in the first few months, especially in the first six weeks. Again, this warranty is another great sales tool and extremely cost effective when the rehabber does his job correctly in the first place.

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