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Are Home Warranties Worth It? A Study in the Richmond Housing Market

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  • Justin Contat
  • Bennie Waller

Abstract

We are the first to show that home warranties are beneficial by providing a valuable form of insurance to home buyers, which home sellers then (partially) extract in the form of price premiums and faster sales. The benefits of offering a home warranty differ among homes, with older homes tending to receive larger price premiums and lower-priced homes tending to sell faster. For the average home in our data that is priced at $236,000 and 28 years old, offering a home warranty is associated with a price premium of at least $4,000 and a reduction in time on market of at least 2.5 days. Additionally we find some evidence of principal-agent conflicts in the home warranty market.

Suggested Citation

  • Justin Contat & Bennie Waller, 2020. "Are Home Warranties Worth It? A Study in the Richmond Housing Market," Journal of Housing Research, Taylor & Francis Journals, vol. 29(1), pages 1-19, October.
    • Handle: RePEc:taf:rjrhxx:v:29:y:2020:i:1:p:1-19
    DOI: 10.1080/10527001.2020.1832858
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