In today's real estate marketplace, it has become very common for real estate agents to offer a guaranteed sale program. You see the commercials on the television. You hear the radio ads driving home from work. If your home does not sell by a certain date, the agent agrees to buy the home. They tell you to call for more information!
In today's article, I would like to discuss advantages and disadvantages of this type of home selling program. I would also like to touch on the important factors for home sellers to consider when looking at this alternative home selling solution.
First of all, when a real estate agent agrees to purchase a home from the seller, it generally is after a set time period. Some agents have a six month contract, where at the end of the six month period, they agree to purchase the home. The biggest advantage to you as the home seller is you know that without a doubt, your home will be sold at the end of that time period. Some however, have a longer time period. And some have a shorter time period. Be sure to check with the realtor to find out exactly what the term of the contract may be.
However, the largest disadvantage to a home seller, is that the price at which the home will be purchase is a discount. Because the realtor who is buying the home has certain unavoidable costs in buying, holding, and reselling the home, the price at which the home is purchased is a discount. I have heard of various agents discounting the price as much as up to 40-50% off the market value of the home. Some however, have a much smaller discount. Depending upon the average days on market and holding costs an agent may incur, the percent discount may be adjusted accordingly.
Depending upon the motivation of the seller, this program could work extremely well. If as a home seller you have a sizable amount of equity, or the ability to bring money to closing if needed, a guaranteed sale program allows you the certainty of a set closing and sale date. However, if a seller does not want to sell at any sort of discount whatsoever, a guaranteed sale program is probably not the best alternative.
In conclusion, when considering this type of home sale arrangement, be sure to read all of the paperwork and have your agent explain his or her guaranteed sale program in detail. For the right client, it can be just what you may be looking for. For others, it simply may not be the right fit.
Ryan O'Neill is a licensed agent with RE/MAX Advantage Plus. As the founder of The Minnesota Real Estate Team, Ryan and the team help clients buy and sell Minneapolis Condos and Minnesota Real Estate.
