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Guaranteed Home Sale Programs Are Gimmicks

Every once in a while I get a call from a past client or a potential client asking about this Guaranteed Sales Program that we see on billboards and on local television advertisements or hear it on radio. Have you ever seen somthing like this and wondered what the heck it was about?:

"Guaranteed Sold Program

Your Home Sold in 29 Days... or WE WILL BUY IT.

Trapped in real estate limbo? Are you anxiously trying to sell your present home before taking possession of your new residence? With the Guaranteed Home Sale Program, you can list your home today, knowing for certain, that it will be sold and off your hands within a 29 day period... period. Our real estate company is able to offer you a 29 Day Guarantee because we have a proven sales system that works. The guarantee is just how we turn our faith in ourselves into a better offer for you.

Think that sounds too good to be true? We can do even better.

In order to doubly protect you, if after we mutually agree on the guaranteed price, I am able to sell your home for more money than the guaranteed price, YOU get the higher price, not me."

This was almost word for word directly off of a local agent's website. (I did remove the identifying agent's name and the brokerage agency's name. There are similar programs offered by different agents and different real estate agencies.)

So these folks ask me about the "program" and if I offer the same thing. I indicate to them that while I am certified to offer the program, ethically I don't participate in these types of gimmicks. The Guaranteed Home Sale Program is, in fact, one of the biggest gimmicks in the real estate industry! It is the only agent marketing plan that I remember seeing specifically addressed in the Provincial Real Estate Act with specific requirements on what has to happen.

Wikipedia defines a gimmick as a unique or quirky feature that makes something stand out. The special feature however, is typically thought to be of little relevance or use. Real Estate agents who use this marketing tactic are doing just that – trying to stand out from the crowd.

It really is one of the biggest gimmicks in real estate marketing. The program is run by agents who's purpose is to get their phone to ring or someone to fill in the online request for a sales appointment. Everyone loves to hear things that are too good to be true. The problem with that, as we all know, is they rarely ever work out the way we hope they will.

But, you really need to understand this one premise. An agent is not going to be buying your home for top-dollar. Why would they? The price they will offer you will be 10%, 20% or even 30% below market value. If you don't agree on their price to list the home at, then you don't get the Guaranteed Sale Program guarantee.

For me, it really is an ethical dilemma when the agent is supposed to be working in the client's best interest while having them involved in a contract like the this that more often than not is NOT IN THE CLIENT'S BEST INTERESTS.

I have to hand it to the real estate agents that use this gimmick as part of their marketing plan because there are quite a few home sellers that actually believe there is something special going on. It's seems that some consumers believe that these guys are really not your average real estate agents but some kind of "Realtor Super Marketing Genius!"

One of the sample agreements that I reviewed has a condition that the seller has to agree up front to a regular schedule of price reductions if the house doesn't sell within certain time-frames. For instance, there might be a big price reduction EVERY 2 weeks for some period of time and those price reductions are locked in.

Here are some of the other requirements that may or may not be in one of these contracts:

  • Seller has to buy their next home using this real estate agent.
  • Seller has to buy one of the homes this real estate agent has personally listed for sale.
  • Seller has to pay the real estate agent an additional commission on the purchase of their next home if not one of the agent's personal listings.
  • Seller has to buy a more expensive home than the one they are selling.
  • Seller must pay the realtor a 6% or higher commission.
  • Seller must get an inspection done prior to listing and must make all reasonable repairs indicated in the inspection report. Keep in mind that inspections are typically very detailed and it's not unusual for them to identify 50 or more issues that "need attention."
  • Seller must get a staging assessment and must follow the recommendations of the stager, which could include the rental of thousands of dollars of furniture.
  • The guaranteed purchase is subject to a third-party appraisal at or above the guaranteed purchase price. If the appraisal comes in lower than the agreed to price, then the purchase price is lowered or the guarantee is cancelled.
  • The guaranteed price might be automatically discounted by some percentage of the "market value" which, of course, is determined by the real estate agent.
  • Homes above a certain price point may be excluded from the program.

Think this list is long enough? It's a win for the real estate agent.

If you're really curious about a program like this, my advice is to simply call up the real estate agent advertising the offer and requesting the term sheet/contract you would have to sign. They'll probably resist just sending it to you without an extensive conversation or a high-pressure sales meeting, but I don't see how they could simply refuse to give it to you.

Once you get it in your hands you can quickly review the multitude of conditions that will surely be there and then you can make an informed decision as to see if this is something you would really be interested in. I'd be surprised if you really wanted to pursue it.

Are there cases where the guaranteed sales program is of some benefit? YES. Where the homeowner absolutely has to sell their home within a specific time-frame AND where they have enough equity in the home, or the financial resources to prepay any mortgage shortfall. However, many (if not most) homeowners are not initially pleased with the guaranteed price of their home, because it does not reflect the true value of the property. However, the price is intentionally set below the current market value to ensure the real estate agent can deliver on the guarantee. The purpose of the guaranteed sales program is to guarantee the home will be sold, NO MATTER WHAT. For those that need to sell, the guarantee acts as your financial safety net. Most homes will sell above the guaranteed price within the reasonable time frame, which means the guarantee is most often never needed by the typical homeseller.

Here is a video of another agent's personal take on Guaranteed Sales Programs:

Source: Used under standard YouTube licence terms.

Something else occurs to me... If you're a buyer considering a home marketed by a real estate agent who offers a guaranteed sale program and you see regular price drops taking place, then there's a good chance that that home is being sold under one of these programs. As such, that is a huge, red flag that the seller and real estate agent are both desperate and you should be able to get the upper hand in any negotiations! Contact me, and I'll work with you to get the best deal available for you!


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