Surprise repairs and appliance replacements can be a huge expense for homeowners. Your clients could mitigate their out-of-pocket expenses and save money by buying a home warranty.

Many agents and brokers don’t know or are misinformed about home warranties, says Kimberly Azpeitia, Choice Home Warranty senior account manager.

She offers these tips for you and your clients.

What do they cover?

Home warranties—also referred to as residential service contracts—help pay to fix or replace home systems and appliances that have unexpected mechanical issues due to normal wear and tear.

Home warranties don’t cover known, pre-existing conditions. “One of the biggest misconceptions is when an agent tells clients they don’t need to ask for repairs once the inspection is done because the home warranty will fix it,” Azpeitia says.

Why are they useful?

Some agents and consumers think home warranties are useless and won’t pay for anything. But the payout on a home warranty depends on the specifics of a situation.

Homeowners may find that a $500 policy could pay out a few thousand dollars if they file successful claims, Azpeitia says.

Some people think nothing of paying hundreds for an extended warranty on a refrigerator, but a home warranty would do the same thing for all of their appliances and systems, according to Azpeitia.

Who benefits?

Home warranties can help first-time and low-income homebuyers the most, Azpeitia says. These buyers may have poured every penny they have into their home.

“Not having the warranty could be a huge financial burden if there’s an unexpected expense,” she says. “If the A/C breaks and it takes $5,000 to $10,000 to replace it, or it costs $700 to add Freon, that’s a problem for them. They may need to go without until they get their funds together or use credit or borrow the money.”

But home warranties aren’t just for first-time homebuyers or buyers alone. Existing homeowners can add a policy. Landlords and property managers can buy policies. Sellers can even add a policy while they’re listing their homes as an incentive to buyers or to provide buyers more peace of mind.

Who can I talk to?

Azpeitia says agents should discuss home warranties with clients early on, ideally during the first consultation.

Agents should connect with their local home warranty representatives and build relationships just like they would with title companies and other related providers.

“Allow the representative to explain the policy to your client. That’s what we’re here for,” she says. “We can talk to those buyers, answer questions, explain policies, and set clear expectations.”

Agents who receive any compensation from a residential service company must disclose any such payments. The compensation cannot be contingent upon a party to the real estate transaction purchasing a contract or services from the residential service company. Additionally, any payment must comply with RESPA guidelines, and therefore must be limited to the reasonable value of services actually rendered. Disclosure of Relationship with Residential Service Company (TXR 2513, TREC RSC-3) can be used to provide notice of any received compensation.

How can I learn more?

Azpeitia teaches the CE course Home Warranty 101. She encourages agents to learn more about these policies as a way to help their clients.

“Six months after closing, when everyone else has moved on, that might be when the homeowner starts placing the first few claims,” she says. “We’re with homeowners way after everyone else, sometimes years after if they’ve renewed their policy.”