Home Warranty at Closing: Who Pays and When

At closing, a home warranty is usually paid as a one-time first-year premium that appears as a line item on the settlement statement, most often charged to the seller as a negotiated concession but sometimes split or paid by the buyer. The premium is a one-time charge for the first year, and the buyer still owes a service-call fee each time they request service. It is a small, optional cost in the transaction, not a closing requirement: Texas's licensing regulator says "you are not required to purchase a residential service contract when you purchase a new or existing home" §.

Who pays and how it shows on the settlement statement

There is no fixed rule for who pays. The most common pattern is the seller covering the first-year premium as a concession, which appears on the settlement statement as a seller-paid charge to the warranty company, a small line against a five- or six-figure transaction. When the buyer pays, it appears as a buyer charge in the same section; when it is split, both lines appear. The exact line label varies by provider and settlement agent, but the charge is itemized, not bundled into a lender fee, so either party can see precisely what was paid and to whom.

The premium itself is the one-year plan cost, which depends on tier and provider; the home warranty cost guide has published examples. As one of them, 2-10 Home Buyers Warranty lists its homeowner Systems plan at $39.99 a month and its Pinnacle plan, which adds appliances, at $59.99 a month §. The service-call fee is not paid at closing; it is paid later, each time you request service. American Home Shield's 2024 sample contract, for example, prints it as "[$100] OR [$125]" §. A buyer reading the settlement statement should treat the warranty line as the premium only and budget separately for the service fee. Who pays this line is itself negotiable, and who holds the bargaining power in each market is covered in home warranty negotiation.

When coverage actually starts

The closing-timing detail that matters: a real-estate-transaction plan can start without a wait. American Home Shield's 2024 real estate sample lists an initial waiting period of "[0 days]" outside new construction §. A direct plan may impose one: Liberty Home Guard's sample policy starts coverage 30 days after purchase §. That is the practical reason to arrange the plan through the transaction rather than buying a direct plan a week after move-in, because a direct plan with a wait would leave the riskiest first month uncovered.

Starting at closing does not lift the pre-existing-condition exclusion. Coverage starting at closing means a system that fails after closing from normal use is claimable; a system the inspection already flagged as defective is not: American Home Shield's 2024 sample, for one, excludes pre-existing conditions that "were either known by you or were reasonably detectable by you," and the company decides at claim time, after the contractor it sends gives a diagnosis §. A buyer who treats the at-closing plan as a way to make the warranty company pay for a problem documented during due diligence will get a denial. Known defects belong in the inspection-contingency repair request before closing, not the warranty after it.

This is who the at-closing warranty is wrong for. A buyer of a new-construction home typically has a builder warranty, which Texas's regulator says covers "items that are permanent parts of the home," such as floors, plumbing or electrical work, so a plan bought at closing partly overlaps it §. A buyer who would rather self-insure and has the reserves to absorb a replacement keeps more money on average by declining the line and banking the equivalent. And a buyer who wants to choose a specific contractor will find the in-network dispatch model conflicts with that from the first claim.

For the buyer it suits, an older resale home, a thin repair reserve, and a seller willing to fund the first year, accepting the line at closing is a rational, low-friction choice. Before accepting whatever plan the seller's agent defaulted to, read what a buyer should know at closing and compare the real home warranty cost ranges so the cap on the home's oldest system is not a surprise at the first claim.