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Home Warranties Help Homes Sell Faster, Higher Prices

study [1] released Monday by the Service Contract Industry Council [2] (SCIC) has found that homes covered by a protection plan sell faster and for more money than those without one.

According to SCIC's most recent look at home sale prices nationally, homes sold with a protection plan spend, on average, 11 fewer days on the market.

SCIC's findings also show that homes on average sold for about $2,300 more when covered by a plan. The ability to transfer a home warranty to new owners also helps create added incentives for buyers, according to Tim Meenan, the council's executive director.

"Because home warranties can be transferred to the new owner, buyers are finding that the extra protection of a service contract can ease this apprehension," Meenan said. "Home buyers understand that when it's time to sell in the future, the home will have an increased resale value."

With housing sales increasing amid the economic rebounds, home warranties make sense to help increase the home's marketability, Meenan said.

National housing markets are indeed showing signs of strength and stability [3]. And while there's been much talk of shrinking inventory in some markets (particularly in markets like coastal California or Houston, where competition for homes among rapid population growth is fueling a seller's market), the most recent National Housing Trend Report [4] released by Realtor.com [5] has found that inventory and price continued to rise for the month of April. This suggests a more robust national housing market in which the "dramatic shortages [6]" of 2013 are being replaced by moderate home price gains and increasing inventories.

Whatever the case, warranties give sellers a competitive edge, Meenan said. They also give buyers the peace of mind that the everyday breakdowns on smaller electrical appliances, such as refrigerators or microwaves, that come from defects or everyday wear and tear will be covered. These contracts help homeowners avoid unexpected, potentially large repair and service bills to things like duct work, plumbing, or the HVAC system.