Quick Comparison
| Factor | Repair Credits | Home Warranty |
|---|---|---|
| What it covers | Specific known issues from inspection | Unexpected breakdowns of covered systems |
| Cost to seller | Full repair amount (often $2,000-$15,000+) | $400-$700 for one year of coverage |
| When you get it | At closing (reduces your out-of-pocket) | Coverage starts at closing, claims filed as needed |
| Your control | Full - you pick the contractor, timeline, scope | Limited - warranty company assigns contractors |
| Pre-existing conditions | Covers them (that's the point) | Usually excluded if known before policy starts |
| Coverage limit | Whatever amount you negotiate | Typically $2,000-$5,000 per item, varies by plan |
| Service call fee | None | $75-$125 per service call |
| Best for | Known problems identified during inspection | Aging systems that currently work but might fail |
Repair Credits Explained
A repair credit is a dollar amount the seller agrees to give you at closing, either as a direct credit reducing your closing costs or as a price reduction. You take that money and hire your own contractors to address the issues found during the inspection.
Advantages of Repair Credits
You control everything. You pick the contractor, you decide the scope of work, you set the timeline, and you verify the quality. If the inspection found a failing water heater and you get a $1,500 credit, you can choose a high-efficiency replacement, go with a basic model and pocket the difference, or upgrade to tankless if you want to add your own money to it.
Credits also address known problems directly. The inspection found specific issues. Credits give you specific money to fix those specific things. There is no claims process, no coverage questions, no exclusion language to navigate.
And the money is real. A $5,000 credit at closing is $5,000 in your pocket on day one. A $500 home warranty is a promise that might pay out later if certain conditions are met.
Disadvantages of Repair Credits
You have to actually manage the repairs yourself. After closing, you need to get quotes, schedule contractors, oversee the work, and deal with any complications. For first-time buyers who have never hired a contractor, this can feel overwhelming.
Credits also require the seller to agree to a specific dollar amount, which can be a tougher negotiation than a warranty. A seller who balks at a $6,000 credit might readily agree to a $500 warranty because the out-of-pocket difference is significant for them.
There are also lending limits. Your lender may cap seller credits at a percentage of the purchase price (typically 3-6% depending on loan type). If you need substantial credits, this ceiling can be a constraint.
Home Warranties Explained
A home warranty is a service contract that covers repair or replacement of major home systems and appliances for one year after closing. The seller buys the policy (typically $400-$700), and you file claims as things break down during the coverage period.
Advantages of Home Warranties
Warranties provide a safety net for the unknown. Your inspection might give the HVAC system a clean bill of health, but a 14-year-old furnace can fail at any time. A warranty covers that kind of surprise. You call the warranty company, pay a service fee ($75-$125), and they send a technician.
They are also simple for sellers to agree to. A $500 warranty is much easier for a seller to stomach than a $5,000 credit. In competitive markets where you don't want to push too hard on negotiations, asking for a warranty instead of credits can keep the deal moving.
Some warranty companies also cover items that are hard to inspect thoroughly, like plumbing lines inside walls, electrical wiring behind drywall, and ductwork in inaccessible areas.
Disadvantages of Home Warranties
Pre-existing conditions are the big problem. Most warranty contracts exclude conditions that existed before the policy start date. If your inspection report notes that the HVAC system is 18 years old and showing signs of wear, and then the HVAC fails three months after closing, the warranty company may deny the claim because the condition was documented before coverage began. I have seen this happen more times than I can count.
Coverage limits cap payouts per item and per year. A typical plan might cap at $2,000-$3,000 per item. If your furnace dies and replacement costs $6,000, the warranty covers $3,000 and you pay the rest. The marketing materials don't emphasize this.
You also don't get to choose your contractor. The warranty company dispatches their network technicians, and the quality varies wildly. My friend Rob, a plumber, worked for a warranty company early in his career and says the pay was so low that only the least experienced technicians took the jobs. That is not universal, but it is common enough to mention.
Service call fees add up. At $100 per call, filing six claims in a year costs $600 on top of the warranty premium. For smaller repairs, the service fee can approach the repair cost itself.
When to Ask for Repair Credits
Credits are the better choice whenever the inspection identified specific, known problems that need to be fixed. Some examples.
Clear-Cut Repair Credit Situations
- Water heater past its lifespan: The inspection found it, you know it needs replacing, a warranty will likely deny coverage because it was a documented pre-existing condition. Get a credit for $1,200-$1,800.
- Roof with 2-3 years of remaining life: A warranty won't cover a roof that was already nearing end of life. Get a credit or price reduction reflecting the near-term replacement cost.
- Electrical panel that needs replacement: Federal Pacific, Zinsco, or other panels flagged as safety concerns. These are known issues. Credit of $1,500-$3,000 depending on the scope.
- Foundation cracks requiring repair: Structural repairs are expensive and specific. Credits let you hire the engineer and contractor of your choice. Credit of $3,000-$15,000+ depending on severity.
- Plumbing repairs: Polybutylene replacement, failing drain lines, or fixture replacements. These are documented conditions that warranties would likely exclude.
When a Home Warranty Makes Sense
Warranties work best as a complement to credits, not a substitute for them. Here is when a warranty actually provides value.
Good Home Warranty Situations
- Aging appliances that currently work: A 10-year-old dishwasher and range that passed inspection but could fail anytime. A warranty gives you some coverage for that first year.
- HVAC in the middle of its lifespan: The system is 10-12 years old, works fine now, but has years of hard use ahead. If it passed inspection with no noted concerns, a warranty legitimately covers a future breakdown.
- First-time buyers who want peace of mind: The psychological comfort of knowing you can call someone if the furnace dies in January has real value, even if the financial math doesn't always favor warranties.
- Homes where everything is aging but nothing is broken: When the report says "functional but nearing end of useful life" on several systems, a warranty provides a buffer.
The Best Approach: Ask for Both
In most transactions, the smartest play is to negotiate credits for known issues and ask for a warranty to cover the unknowns. The inspection found a failing water heater and an aging electrical panel? Ask for a $3,500 credit to cover those specific repairs. Then ask for a home warranty to cover the 12-year-old HVAC system and the appliances that are getting up there in age.
Sellers are often more receptive to this split approach because the warranty is cheap from their perspective and it shows you're being reasonable by not asking for credits on everything. A request for "$3,500 in credits for the water heater and panel, plus a home warranty for the aging systems" reads differently than a request for "$8,000 in credits" even if the total protection might be similar.
A Real Example
I inspected a 1990s colonial for a buyer named Darren last year. The inspection found a 16-year-old water heater (replace soon), a 15-year-old HVAC system (functional but aging), an outdated 100-amp electrical panel, and typical wear on kitchen appliances.
Darren's agent negotiated a $2,800 credit for the water heater and electrical panel, plus a one-year home warranty covering HVAC and appliances. The seller paid about $3,300 total ($2,800 credit + $500 warranty). Darren replaced the water heater and panel within the first month using his credits.
Eight months later, the furnace blower motor failed. The warranty covered the repair minus the $100 service call. The repair would have been $650 out of pocket. In this case, the warranty more than paid for itself on a single claim.
That won't always happen. But it shows how credits and warranties can work together when each is applied to the right category of problem.
Red Flags to Watch For
A few scenarios where you should push back hard.
- Seller offers a warranty INSTEAD of addressing safety issues: A home warranty does not fix a Federal Pacific panel, a non-functional TPR valve, or missing GFCI outlets. Safety items need credits or actual repairs before closing. Period.
- Seller's agent says "the warranty will cover it": Read the warranty contract. Pre-existing conditions documented in the inspection report are frequently excluded. Don't take an agent's word for what a warranty will and won't pay for.
- Warranty company has terrible reviews: Not all warranty companies are equal. Before accepting a warranty, search the company name plus "claims denied" and see what comes up. Some companies are notorious for finding reasons not to pay.
Bottom Line
If the inspection found it, get a credit for it. Warranties are not designed to cover problems you already know about. They are designed to cover surprises. Use each tool for what it is actually good at: credits for the known, warranties for the unknown. And don't let a $500 warranty convince you to skip a $5,000 credit that you actually need.