General information, not legal or insurance advice

Home Warranties in Tennessee: What Buyers and Sellers Should Know

A home warranty comes up in a lot of Manchester and Coffee County sales. A seller may offer one to make a listing stand out, a buyer may ask for one in an offer, or a buyer may buy one after moving in. The name sounds simple, but a home warranty is not the same thing as homeowners insurance, a builder warranty or the seller disclosure, and mixing them up can lead to surprises.

This guide explains what Tennessee law says a home warranty is, how it differs from the other protections in a purchase, who usually pays and how to read the contract before you count on it. It is general information from Tennessee statutes, federal closing rules, the Consumer Financial Protection Bureau (CFPB), the Tennessee Department of Commerce and Insurance (TDCI), the Federal Trade Commission (FTC) and the Tennessee Attorney General. It is not legal or insurance advice, and I do not recommend or sell any warranty company.

What a home warranty is

A home warranty is a service contract. You pay for it separately, and for a set period the company agrees to repair or replace certain home systems and appliances when they fail. Tennessee law describes a service contract in TCA 56 2 126 as a contract, for a separately stated price and a specific duration, to service, repair, replace or maintain property, or to pay for that work, when the property fails because of a defect in materials or workmanship or normal wear and tear.

Two points in that law matter for homeowners:

It is not insurance under Tennessee's insurance code. TCA 56 2 126 says selling, issuing and administering a service contract is not the business of insurance and is exempt from regulation as insurance under Tennessee's insurance title. That is a big difference from your homeowners policy, which TDCI regulates.
It covers failures, not disasters. The definition is built around things that break down from defects or normal wear and tear. Damage from a fire, storm or break in is what homeowners insurance is for.

What Tennessee requires in the contract

Since July 1, 2023, Tennessee's Consumer Protection Act has a specific rule for these contracts. Under TCA 47 18 104(b)(56), it is an unfair or deceptive practice to issue or deliver a home service contract to a consumer in Tennessee that does not specify the merchandise and services to be provided and any limitations, exceptions or exclusions. The change came from Public Chapter 133 of 2023, and it applies to contracts entered into, amended or renewed on or after July 1, 2023.

In plain terms, the contract itself should tell you what is covered and what is not. If an item is not listed, do not assume it is covered. Read the limits and exclusions section before you rely on the warranty for anything.

Home warranty vs homeowners insurance

Buyers ask me if a home warranty can take the place of insurance. It cannot. Here is how they compare:

What it pays for. The CFPB says homeowners insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary. A home warranty is for systems and appliances that fail from defects or normal wear and tear.
Whether your lender requires it. The CFPB says lenders generally require proof of homeowners insurance when you have a mortgage. A home warranty is optional, and federal closing rules require a buyer paid warranty to be labeled optional on the Closing Disclosure.
Who regulates it. Homeowners insurance is regulated by TDCI. A service contract that fits TCA 56 2 126 is exempt from regulation as insurance, and the Tennessee Consumer Protection Act rule above applies to home service contracts.
What else is left out. TDCI says flood damage is not included in a homeowners policy, and a home warranty is not flood coverage either. My flood zones guide explains flood insurance.

My homeowners insurance guide explains what a typical policy covers, replacement cost vs actual cash value and the Tennessee sinkhole rule.

Home warranty vs builder warranty

On a newly built home, the builder often provides its own written warranty. Tennessee treats that differently in one important way: under TCA 66 5 209, the first sale of a dwelling is exempt from the Tennessee disclosure statement rules when the builder offers a written warranty. So on new construction, the builder warranty matters even more.

An FTC consumer publication on warranties for newly built homes (July 2005) describes how these warranties have commonly worked:

Coverage periods vary by component. It says most components are covered for workmanship and materials during the first year, heating, cooling, plumbing and electrical systems are generally covered for two years, and some builders cover major structural defects for up to 10 years.
Common exclusions. It says new home warranties typically do not cover household appliances, small cracks in brick, tile, cement or drywall, or components covered by a manufacturer warranty.
Disputes. It says many new home warranties provide for mediation of disputed claims, followed by mandatory binding arbitration.

Every builder warranty is different, so ask for a copy before you sign the purchase contract. Some buyers of new homes also buy a separate home warranty for appliances, which a builder warranty often leaves to the manufacturer. My new construction guide and my building a new home guide include questions to ask any builder.

A warranty does not replace an inspection or the disclosure

A home warranty is not a reason to skip your due diligence. Under TCA 66 5 201, the Tennessee disclosure statement is not a warranty of any kind by the seller and is not a substitute for inspections by the buyer or a professional home inspector. A home warranty does not change that. It does not tell you the condition of the roof, the age of the heating system or whether the foundation has a problem, and its exclusions may leave out the very items an inspection would flag.

Plan your home inspection and any added tests the same way you would without a warranty, and use your inspection contingency to deal with what you find. If the seller provides a disclosure statement, read it closely. My seller disclosure guide explains what it covers.

Who pays for a home warranty

Who pays is negotiable and is set by your purchase contract. Common ways it happens:

The seller pays. A seller may offer a home warranty for the buyer as part of the listing or agree to one in the contract.
The buyer asks for it. A buyer can ask the seller to pay for a warranty in the offer, the same way a buyer might ask for a closing cost credit.
The buyer pays. A buyer can buy a warranty at closing or on their own after moving in.

If it is part of the deal, put it in writing in the purchase contract: who pays, the plan or coverage level, and who chooses the company. If you are using a loan and the seller is paying other costs too, ask your lender how any seller paid item fits your loan's limits. My seller concessions guide explains those limits.

Where it shows on your Closing Disclosure

A warranty paid at closing appears on page 2 of the Closing Disclosure, in the Other Costs table. Federal rules under 12 CFR 1026.38(g)(4) put charges for services the buyer, seller or another party obtains in the closing under the Other subheading, with columns for borrower paid, seller paid and paid by others. In the CFPB's sample Closing Disclosure, a Home Warranty Fee appears in Section H, Other, in the seller paid column.

When the buyer pays, 12 CFR 1026.38(g)(4)(ii) requires the label for a separate warranty product to end with "(optional)." The CFPB's Closing Disclosure explainer describes this section as costs for other services you have chosen and suggests reviewing the amounts to make sure they match what you expect. You should receive your Closing Disclosure at least three business days before closing, so check that the warranty line, the company name and who pays match your contract. My closing day guide explains the rest of that final review.

Questions to ask before you sign

Read the actual contract, not just the brochure. These questions come up most:

What is covered and what is excluded? Tennessee law requires the contract to specify the merchandise and services provided and any limitations, exceptions or exclusions.
What do you pay per claim? Ask about any service call fee or deductible each time a technician comes out, in addition to the price of the contract.
Are there dollar limits? Ask whether there are caps per item, per claim or per year.
What about conditions that existed before coverage started? Ask how the company treats a problem that was already there, and whether an inspection report affects coverage.
Who chooses the repair company? Ask whether you must use the company's contractor and whether replacement is limited to a certain brand or the cost of a similar item.
How do claims work? Ask how to file, how quickly service is scheduled and whether there is an emergency line.
Can it be canceled or transferred? Ask about refunds, fees and what happens if you sell the home during the term.
How are disputes handled? Look for arbitration language, which can limit your choice to go to court.

If you have a problem with a claim

Start with the company. The FTC publication suggests filing your claim the way the warranty says to, putting your request for repair in writing even if there is a hotline for urgent requests, and keeping a record of your letters and conversations.

If you cannot resolve it, the Tennessee Attorney General's Division of Consumer Affairs offers an informal complaint mediation program. Its complaint page says:

Who can file. You live in Tennessee, the business is in Tennessee or the transaction happened in Tennessee.
Contact the business first, including a manager or the corporate office, before you file.
How it works. A consumer specialist sends your complaint to the business and asks for a response within 21 days, with a second notice and 14 more days if there is no reply. The average mediation time is 90 days.
What it cannot do. The Division cannot represent you, give legal advice, decide whether a business broke the law or force a business to fix your complaint. It mentions small claims court and a private attorney as other options.
Public records. Complaints submitted to the Division are subject to the Tennessee Public Records Act.

You can reach the Division at (615) 741 4737 or consumer.affairs@ag.tn.gov.

For sellers

Offering a home warranty is a choice, not a requirement. Some sellers offer one because it gives buyers some comfort about older systems. If you offer one, write it into the listing and the contract clearly so everyone knows who pays and when the coverage starts. Offering a warranty does not change your duty to complete the Tennessee disclosure statement if your sale is not exempt.

Separate from a home warranty, gather any manufacturer, roofing or system warranties that may transfer to a buyer, along with repair receipts. My prepare to sell checklist lists the paperwork to pull together, and my seller closing costs guide shows how agreed items come out of your proceeds.

How I help

I do not sell or recommend home warranty companies, and I cannot tell you what a contract covers. What I do is help you decide whether to ask for or offer a warranty as part of the deal, write it clearly into the contract, keep the inspection and disclosure steps on track and check that the warranty line on your Closing Disclosure matches what you agreed to.

Keep reading:

Fair housing note: I work with every buyer and seller and follow the same steps for everyone.

This guide is general information from public sources, not legal or insurance advice. Laws and contract terms change, so read your contract and ask a Tennessee attorney about your situation.

Buying or selling in Manchester?

I can help you decide whether a home warranty belongs in your offer or your listing and make sure it is written clearly. Call or text me at (615) 497 1658, or request my buyer guide below.

Common questions

What is a home warranty in Tennessee?

A home warranty is a service contract you pay for separately that covers repair or replacement of certain systems and appliances for a set period when they fail from defects or normal wear and tear. Under TCA 56 2 126, a service contract is not the business of insurance and is exempt from regulation as insurance in Tennessee.

Is a home warranty the same as homeowners insurance?

No. The CFPB says homeowners insurance pays for losses from unexpected events like a fire or burglary, and lenders generally require it. A home warranty covers systems and appliances that break down from defects or wear and tear, and it is optional.

Who pays for a home warranty when you buy a house?

It is negotiable. A seller may offer one, a buyer may ask the seller to pay for one in the offer, or a buyer may buy one at or after closing. Whatever you agree should be written into the purchase contract.

Where does a home warranty show on the Closing Disclosure?

In the Other Costs table on page 2, under the Other section, with columns for borrower paid, seller paid and paid by others. When the buyer pays, federal rules require the label to end with (optional). The CFPB sample form shows a Home Warranty Fee in the seller paid column.

What does Tennessee law require in a home warranty contract?

Under TCA 47 18 104(b)(56), it is an unfair or deceptive practice to issue or deliver a home service contract in Tennessee that does not specify the merchandise and services provided and any limitations, exceptions or exclusions. The rule applies to contracts entered into, amended or renewed on or after July 1, 2023.

Can a home warranty replace a home inspection?

No. A warranty does not tell you the condition of the home, and its exclusions may leave out the items an inspection would flag. Under TCA 66 5 201, the Tennessee disclosure statement is also not a warranty and not a substitute for inspections, so plan your inspection as usual.

Matt Sargent is a Tennessee licensed affiliate broker with Keller Williams who helps buyers and sellers in Manchester and Coffee County. Call (615) 497 1658 or send a message.