The Gimmick
If you haven’t just come out of a coma, I am pretty sure that you have heard or seen a commercial where a real estate agent guarantees the sale of your home. On the surface, this sounds like an extraordinarily great program, right? An agent is willing to guarantee the sale of your home, simply by listing your home with them. After all, it’s the “Guaranteed Sale Program.”
At least, that’s how simple they would like you to think it is…
The fact is, this program, in essence, is a bait and switch scheme. Yes, it sounds awesome. Yes, it sounds too good to be true. Yes, it is too good to be true.
Here’s how the “program” works.
The agent researches your home’s value in today’s market, and offers to buy your home for about 70% of the market value. Should the home not sell in the allotted time, they purchase your home at that 70% of market value. This program allows you to move on without further hassle about selling your home, but potentially leaves thousands of dollars on the table that should be yours.
As a seller, you need to ask yourself a few questions:
- Will I be alright potentially leaving 30% or more of the home’s value on the table?
- How will I respond when I see my former home get sold for 30% or more, shortly after I sell it to the agent?
- Doesn’t this feel like bait and switch?
You didn’t think the agent was going to hoard a bunch of homes they had to buy, did you? If there’s a buck to be made at seller’s expense, many agents will attempt to grasp it. And, like stocks, buying low and selling high is how a return on investment is created.
As with a fair number of practices by real estate agents, this one is all about making the agent’s phone ring or inbox light up with folks inquiring about listing their home for a guaranteed sale.
[update]
A friend and colleague pointed out that the profit made by the folks offering the guaranteed sale program is a good bit more than the difference between the market value and guaranteed price. Granted, we are bordering on a very semantical discussion, but the numbers do not lie.
For a house with a market value of $200,000 and a guaranteed sales price of $140,000 (70% of market value), if the home is then resold for the market value by the guarantor, their profit as a percentage of the guaranteed sales price is nearly 43%.
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