Sounds great, right? If I were a homeowner who needed to sell and this glorious real estate agent was calling me through billboards, radio, and Tv, I have to admit, it would be awesome if a real estate broker bought my house if it didn’t sell. Come to think of it, since I am a real estate broker, and I see all these real estate agents advertising their guaranteed sale programs, shouldn’t I jump on board? No. Let me tell you why I won’t do a guaranteed sale program, and why I would advise you that if you are looking to sell your home, it would be best to look elsewhere for an agent.
The Guaranteed Home Sale Program
The guaranteed sale program isn’t new. The guaranteed sale program has been around forever, and I will say, I see it much more often in great seller markets than when homes aren’t moving. There are many different variations of the program. Here are some of the program variations.
Guaranteed Home Sale Program #1
In this variation, you agree to list your house at a fair market value determined by the agent. In the agreement, you agree to lower the asking price of your home if there are 10 showings and no offer or if there are less than 10 showings in three weeks. The listing agent tells you what you need to paint and how you need to stage your house. If you don’t follow through on any of these recommendations, the deal is void.
Guaranteed Home Sale Program #2
In this variation, you agree to list your house at 95% of market value determined by the listing agent. If after 30 days your house hasn’t sold, you agree to lower your price 10%. If it hasn’t sold again at 50 days, you agree to lower your price another 10%. If the house still doesn’t sell, the real estate agent will buy the house for the listing commission on the original price + repairs. Let’s just do the math on that one, shall we? Say a house has a real market value of $400,000. You are coming to market at $380,000. You lower the price another 10% after the house doesn’t sell in 30 days, so you are at $342,000. Finally, another 10% off of that is $307,800, and minus commissions and repairs, you are somewhere below $300,000. Think about this. Your house should sell for $400,000, and you are selling it to a real estate agent for less than $300,000. Does that make any sense? For the real estate agent, no doubt!
Guaranteed Home Sale Program #3
In this variation, you agree to list your home at the real estate agent’s price. If the house doesn’t go under contract in 30 days, the agent reduces his commission 1 percent. If the house doesn’t go under contract in 60 days, the agent reduces his commission another 1 percent. If the house doesn’t sell in 90 days, the real estate agent is listing the house for free.
Guaranteed Home Sale Program #4
In this variation, you agree to list your home with the listing agent. Then, you agree to have the listing agent represent you when you buy your next home. An added stipulation on this model is that you agree only to purchase a home that is listed by the agent.
Guaranteed Home Sale Program #5
You agree to list your house with the listing agent. Before the house is listed, you agree to purchase a home warranty for the buyer, an appraisal, a private inspection, and have the property staged. After those conditions are met, you agree to a final purchase price after so many days on the market, in this case 120. That price is 25% lower than what the house would sell for in a fair market situation. In this one, you’ve already put a ton of money up front as well, as staging, appraisals, and inspections aren’t free
Other Guaranteed Home Sale Programs
In pretty much any of the previous 5 Guaranteed home sale programs, there are also variations of what happens when the house doesn’t sell for a certain agreed to price or in the agreed to time frame. These variations include:
–We will cover the mortgage until the home sells
–We will sell the home for free
Fun Guaranteed Home Sale Stipulations
There are also all sorts of contract stipulations found in the guaranteed sale programs. Among my favorite
–Seller will have to purchase a more expensive home than the home they are currently selling
–Homes above $200,000 are not eligible for the guaranteed home sale program
–Final sale price is determined on a percentage of a third party appraisal.
Do Guaranteed Home Sale Programs Work?
I’m sure you are wondering if this works. According to Inman real estate news, 7 of the top 20 most productive agent teams used some type of guaranteed sale program in their marketing.
Why Do Guaranteed Home Sale Programs Work?
If you know that these programs are iffy at best, why do you think so many people sign up to list with agents pushing this type of super effective marketing? It comes down to a seller mindset. I’ve mentioned in the past that sellers typically have a fear that their home won’t sell. This fear is lessened when a real estate agent comes along and says, we will buy your home. The real estate marketer’s message is speaking to a consumer need. Contrast “Your home sold in St. Louis Guaranteed” with the message, “#1 Real Estate Agent In St. Louis”. One message speaks directly to the seller. The other message makes the seller have to figure out what relevance being #1 in something has to do with selling their home.
Why won’t Deerwood Realty use a Guaranteed Sale Program?
As the managing broker for Deerwood Realty, I can tell you that we will never use a guaranteed sale program. Here are my reasons.
- Starting a conversation on the wrong foot. The main point of the guaranteed sale program is to get you to call the real estate agent. It isn’t to guarantee the purchase of your home. 9 times out of 10 what happens is you call about the guaranteed sale program, and the agent on the other end pivots to getting a home visit or keeping the conversation going long enough for you to forget the reason why you called in the first place. Heck, you might not even remember why you called in the first place if you’ve been seeing a billboard with the winning copy on it day after day. I don’t like to do business this way. I see it as a bait and switch. To me, it doesn’t take any skill to get the phone to ring if you’re just lying about everything. When you start a conversation off with someone and it’s nothing but lies, do you really want to work with that person to sell what could be the largest financial decision in your life? I wouldn’t.
- Conflict Of Interest. When I am representing you as a listing agent, I owe my loyalty to you. That means that I need to put your interests before mine. How can I represent your interests when I’m already giving you a market price so low that the house will sell within whatever guarantee sales program I’ve roped you into? It would seem to me that I am now in a position where my interests outweigh yours, and I think that is a very real issue.
- Agent Confidence. As a real estate professional, I don’t need a gimmick to sell your home, or to help buyers find the home of their dreams. Everyone’s listing situation is different, and at Deerwood Realty, we work to find the best solutions for each client versus some canned script. If you need a guarantee to sell your home, maybe the agent is just awful at understanding market conditions? Would you want to work with someone who has no confidence in their ability to sell your home?
The Bottom Line On Guaranteed Home Sale Programs
The reality is that very few potential home sellers in St. Louis are going to look up what a guaranteed home sale program is. And, of those people that do call for the guaranteed sale programs, they aren’t going to want to admit that they were fooled into calling, so they will justify it some other way. If you do happen to learn about the guaranteed home sale programs, I’d be interested in knowing if you still went through with listing with that agent or if you decided that this particular type of marketing wasn’t for you.