Guarantee

Key Takeaways

• A guarantee is a promise by one party, usually the builder or the seller, to perform a specific act for the purchaser, such as replacing a roof or repairing a handrail.
• A home warranty is a different product: a service contract covering categories of systems and appliances for a term, rather than one named act by one promisor.
• A guarantee belongs in the purchase and sale agreement or a signed addendum, because the promise is a contract term and has to be provable after closing.
• Washington's seller disclosure statement is disclosure only, and RCW 64.06.020 says it is not a warranty of any kind by the seller or by any real estate licensee in the transaction.

What It Means

A guarantee in a real estate transaction is a promise by one party, usually the builder or the seller, to perform a specific act for the buyer. Replace the roof if it leaks in the first year. Repair the loose deck handrail before possession. Regrade the side yard so water runs away from the foundation. The promise is narrow and named, it has one promisor, and it is enforceable against the person who made it.

That narrowness is what separates a guarantee from a home warranty. A home warranty is a service contract, usually sold by a third party. It covers categories of items, the furnace, the water heater, the built-in appliances, for a stated term, and the buyer files a claim and pays a service fee. Nobody promised any single act.

Because a guarantee is a contract term, it lives or dies in the writing. If a builder's promise to finish the driveway never reaches the Purchase And Sale Agreement or an Addendum to it, the buyer is left arguing after closing about what was said in a walkthrough.

How It Works in Washington

Washington draws a hard line between disclosing a condition and guaranteeing it. RCW 64.06.020 requires the seller of improved residential real property to deliver a seller disclosure statement, known in practice as Form 17, and the statute provides that the statement is for disclosure only, is not considered part of any written agreement between the buyer and seller, and is not to be construed as a warranty of any kind by the seller or any real estate licensee involved in the transaction. A seller who answers a question on that form has told the buyer something. The seller has not promised anything. A buyer who wants a promise has to get it written into the contract.

Washington also does not require magic words to create one. For condominium units, RCW 64.34.443 provides that neither formal words such as warranty or guarantee, nor a specific intention to make a warranty, are necessary to create an express warranty of quality, although a statement that is merely an opinion or a commendation of the real estate or its value does not create one. Read that as a caution running both directions. A written affirmation of fact about the property can bind the person who wrote it, while enthusiasm about the view is sales talk and binds no one.

Example

Gwen Alvarez sells a 2019 build in Pasco to Marcus Webb for $412,000. The inspection turns up two cracked ridge caps on the roof. Gwen does not want the roof opened before closing, so the parties sign an addendum in which Gwen guarantees that a licensed roofer will replace the cracked caps and deliver a paid invoice within 30 days after closing, with $2,500 of Gwen's proceeds held in escrow until she performs. That is a guarantee: one promisor, one named act, one deadline, one source of funds. Separately, Marcus buys a one-year home warranty for $650 covering the furnace, water heater, and kitchen appliances, with a $100 service fee per call. In March the dishwasher fails and the warranty company handles it. In April the roofer still has not appeared, so Marcus looks to the escrow holdback and Gwen's written promise, not to the warranty company.

Common Mistakes and Exam Traps

• A guarantee is one promisor promising one named act. A home warranty is a third-party service contract covering categories of items for a term. Exam items swap the two on purpose.
• The Washington seller disclosure statement is neither a warranty nor a guarantee. It reports what the seller knows, and RCW 64.06.020 says so in the statute itself.
• In a purchase contract a guarantee is a promise to perform an act. In lending, a guarantor is a third party who promises to pay someone else's debt if the borrower does not. Same root word, different job.
• A promise does not have to use the word guarantee to bind the person who made it. A written statement of fact about the property can create an express warranty without any formal wording.