A heat pump system (10) includes a compressor (20), a reversing valve (30), an outdoor heat exchanger (40) and an indoor heat exchanger (50) coupled via refrigerant lines (35, 45, 55) in a conventional refrigeration circuit, a refrigerant to liquid heat exchanger (60), a refrigerant to liquid heat exchanger bypass valve (130), an outdoor heat exchanger bypass valve (230), and an indoor heat exchanger bypass valve (330). A controller (100) is provided to selectively control the respective positioning of the valves (30, 130, 230 and 330) between their respective open and closed positions so as to selectively configure the refrigerant circuit for operation in one of an air cooling only mode, an air cooling with liquid heating mode, an air heating only mode, an air heating with liquid heating mode, and a liquid heating only mode.