Getting from ‘For Sale’ to ‘Sold!’: Home Warranties as a Sales Tool in a Down Market

Getting from ‘For Sale’ to ‘Sold!’: Home Warranties as a Sales Tool in a Down Market

Organizational management books recommend a “bad news sandwich” when sharing something people don’t want to hear. The listener gets two good things with something bad squished in the middle. When it comes to the current housing market, this technique might be a good one. So, here goes.

As of the start of Q3 2022, the United States was short 3.8 million homes (between ownership and rental) from meeting current housing needs.  If you’re a builder, that is 3.8 million opportunities to construct a home, make a sale, and grow your business.

But despite a growing housing shortage, sales of newly constructed homes are down about 18% year over year. While mortgage rates increase—a trend predicted into 2023—sales likely will continue their decline.

Now back to the good news. The market sits at just two months of inventory compared to the normal average of four to six months. People still need homes and there are plenty of creative ways to sell them.

When it comes to value versus cost, a home warranty represents one of the best sales strategies. Here’s why:

  • Product Differentiation Counts

With inventory starting to accumulate, builders need a way for their homes to stand out. The bidding wars happening at the beginning of the year have declined. People have options, so they need a clear value proposition when selecting one home over another.

According to the National Association of Realtors, only 40% of sellers use incentives to win over buyers. Of those that do, just 26% offer a home warranty. Compare that to the 89% of surveyed buyers who indicate they want new homes with warranties. That is low-hanging fruit for builders hoping buyers will choose a new home construction option.

  • Protection Is Popular

Warranties are wins for many parties—beyond just the buyer—influencing a home’s sale. Historically, homeowners could discover a problem with the property and file a lawsuit that brought in the brokers and agents as well. Home warranties help prevent that. The added financial security is popular with mortgage companies who want to ensure the home remains in good condition. Research also shows that insurance companies favor the added risk protection home warranties provide when writing policies and assessing premiums.

  • Peace of Mind Matters

Establishing trust with buyers has value. Giving them peace of mind that they’re making a great purchase, not just today, but for years to come is paramount. Builders often think that constructing a great home is enough. Science says otherwise. A study published in the Journal of Consumer Research found that the happier a consumer is with a purchase, the more risk-averse they become, and the more they want warranty protection.

  • Millennials Want Maintenance Free

Millennials represent the largest population of home buyers. Analysts characterize this group as a budget-conscious generation. Low-maintenance home features are a big priority for them. In fact, 45% of millennial renters say maintenance expenses deter them from buying a home. For 76% of millennials, they have no budget for home maintenance. In fact, 30% do not even own a ladder. Home warranties are imperative for this generation by offering repairs for everything from  structural defects to appliance failures that they may lack the skills or money to fix themselves.

  • Both Sides Receive Value

The majority of today’s buyers want turn-key homes. The National Association of Realtors reports that first-time buyers finance around 93% of a home’s purchase price while repeat buyers finance 83%. This indicates buyers lack significant savings to address major repairs or even minor breakdowns. Yet Consumer Reports shows that more than 28% of major home appliances fail within the first five years. Home warranties offer a big value to buyers at a low expense to builders by affording additional protection for homes and savings accounts.

Add a PWSC Home Warranty to Your Sales Toolkit

PWSC offers best-in-class warranties that put buyers at ease. From 10-year insured structural warranties to annual systems and appliance warranties, PWSC offers protection for every builder and homeowner need. We help builders go from “for sale” to “sold” by offering coverage that differentiates the home, reduces homeowner expenses, and offers peace of mind for life’s unexpected home emergencies. PWSC warranties protect more than 1.7 million homes and many of the nation’s largest builders. Discover why PWSC warranties build trust and sell homes—especially in today’s housing market.


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