Overcoming adverse selection in buying an existing home

Existing home sellers may be aware of defects in the home that are not observable to the untrained eye of a buyer. Sellers may not disclose the defects in order to receive a higher price. Home warranties for existing homes appear to provide protection against defects. However, it is not clear how home warranty compares against building inspections and seller disclosure laws. In an adverse selection model, we study the tools available to buyers to overcome this problem.