How does a Guaranteed Sale program work in Real Estate?

We’ve all seen these signs when out driving around our neighbourhood, right? And if you’re like me, you probably wondered, how does that work? Is it a gimmick? Will a real estate agent actually buy my home if they can’t sell it in 90 days?

I decided to do some research to find out.

In theory, this is a great concept – it alleviates one of the biggest questions in real estate: do I list my house first or do I find my next home and then list my house?

In fact, that one question generally creates a lot of fear and anxiety for sellers.

What if my house doesn’t sell? I might be stuck with two mortgages. What if I sell and I can’t find a new home that suits my needs? I might be out of a house and have to rent. Or even worse … have to move in with my in-laws!

Real estate agents who use the Guaranteed Sale program play on these emotions. They know if they can promise a sale, you can simply buy your next home and list your current home for sale with no risk. Sounds simple right? Sign me up!

But wait. These “programs” come with stipulations, or, as you will notice, little *** in the ad.

It’s all about the fine print

Make sure you read the fine print. Because the great service you think you are getting might not be that great after all.

Here are some examples of the stipulations or caveats in these programs:

The “sale” price must be agreed upon by both parties. Why? Because if the agent is not confident your house will sell at a certain price, they don’t have to purchase it. In most cases, I would argue the agent will err on the side of caution – slightly under-pricing the home.
There is often a price range for this kind of offer. For example, only homes up to $400,000 may be eligible. The agent must be confident the home will sell in 90 days, so they would never offer the guaranteed sale program on a million dollar home as they know these homes can take much longer to sell.
If, after 90 days, the agent is required to buy your home, their purchase price is reduced by their commission rate. And in most cases, I find the agents use a high commission rate for the calculation, like 6%. Essentially, what this means is the agent gets to purchase your home for the estimated sale price, less 6%.
As the seller, you must purchase your next home with the listing agent. So the agent collects a full commission on the next purchase as well.
Typically, there is also some wording that states if an offer is brought to you within X% of the suggested sale price and you do not accept, then the Guaranteed Sale Program is null and void.

A good deal for the realtor

As you can see, the cards are stacked in favour of the realtor. They get to set the “mutually agreed upon” price. They can determine the price range so they are confident it should move in 90 days. If they do have to purchase your home, they get it for 5-6% under market value. And on top of all this, they still get to collect a commission on the next purchase! SIGN MEEE UP!

The truth is … this is a gimmick. It is used to play on your emotions and entice you to pick up the phone and call that agent. Once you are on the phone, the sign has done its job because now they have your phone number and now they can try to pick you up as a client.

In many cases, all the conditions outlined above won’t work for both you and the agent, so they don’t even exercise the “Guaranteed Sale Program.” But it got you to pick up the phone and call, so it did its job!

At Knight Homes, we prefer to conduct our business a little more professionally. We don’t use these bait-and-switch methods – we treat our clients honestly and fairly so they will come back time and time again and refer friends and family. That’s the way to build a business.

Please post your comments or thoughts below. I may even hear from a few realtors on this one!

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