Ash2011,
Banks never pay for home warranty's on short sales. Actually its the investor who owns the note that makes the decision but as a rule of thumb investors do not generally pay for home warranty.
Ask your agent to help you with that cost. Your agent wants to help you get into your home and should be willing to pay for some if not all of this cost to help you get in.
Don't waste your time trying to get the investor to approve the sale for a $350 gap. Unfourtunatly the investor will not reconsider this far into the process. - Fri Apr 15, 2011