Have you ever been curious to see what type of response people are having to the “guaranteed offer in 48 hours” and the “if we can’t sell it we’ll buy it” type programs? This also includes the buying of “ugly houses” and the buying “sight unseen” signs that are on many street corners, some of which are written with only a marker. (WARNING – If the marketing budget only allows for a marker and cardboard, you might want to reconsider your choices).
In an unscientific poll taken using social media and talking with people about what they think of these types of programs, the feedback was generally negative. Responses included: gimmicks, sham, low-ball flipper, low-ball offers, too good to be true, don’t trust the ads, predatory practices and unethical. A few common questions arose as well – How does it work? Can I trust one of these programs?
To be fair, practices like these have been going on for years. Several companies, as well as individual agents, have offered such programs and had success in doing so. Keep in mind that the terms and conditions can vary widely – as can the results.
How does it work?
Generally speaking, to qualify for such a program, the seller will pre-negotiate and agree upon a “buy” price that the agent and broker will pay for the home. The home seller and agent would then decide upon a fair-market value listing price, list it traditionally for a set period of time, and market it for sale. This marketing period may involve updating and staging the home, pre-scheduled price reductions, and open houses.
After the pre-negotiated set of time expires, if the home has not sold, the seller decides to either reject or accept the pre-negotiated “buy” price. If the seller agrees, the agent and broker buy the home directly from the seller.
What is not widely recognized is that the commission is not saved. Of the programs I know of, the total commission is 2% or 3% higher than that of a traditional sale.
Guaranteed offers are similar to this “if we can’t sell it, we’ll buy it” strategy. In its simplest definition: A homeowner lists a home for $250,000. The broker and agent representing that seller offer $195,000 to purchase the home. Despite it being under the predetermined market value of the home, the broker and agent have provided an offer and thus fulfilled their “guaranteed offer” obligation. We have heard of these obligation offers coming in as low as 30% below market value.
Most homes are eligible to utilize these programs. Distressed homes and homes that need severe TLC are often targeted.
Can a consumer trust these programs?
The answer is yes. I have an agent friend who has used these services twice in the recent past and both times the seller was happy with the results.
Remember that every home is unique and each family or seller has a different need or situation. Divorces, job relocations, foreclosures, family illnesses and inheriting a property are some of the situations that utilize these types of programs. For example, if a grandson living in Nashville inherits his grandma’s house in Minneapolis, and he has no emotional attachment to the home, this type of program works great! It enables him to get the money out of the sale of the property with as little hassle as possible.
Additionally, not all of these “get you in the door” type of marketing tactics come to fruition as previously mentioned. Speaking to one agent who advertises this way, they have yet to purchase a client’s home.
At the time of a sale, a home becomes a business transaction. Companies and Realtors® do not stay in business without making profits. The risks of being contractually obligated to buy a property, the carrying costs, and the potential necessary renovations are entirely on the company offering the program. Granted, the reward of the eventual market value sale or above market value sale of the property also goes entirely to the company.
What should I do?
When it comes time to make a decision about your home, seek out a REALTOR® whom you trust. Our mindset is that everyone should have a trusted real estate advisor who is going to take the time to learn about your situation, your home and give you the best options available. And sometimes that might be one of the options listed above.
Contact Fazendin Realtors today. Our agents are available to assist you in learning the current market value of your home and walk you through the home-selling process. Information is what you need to make the best decision for your unique situation, and each of our agents is happy to assist you in whatever way possible.
Realtor / Fazendin Realtors’ Director of Agent Development
President of the Minneapolis Area Association of Realtors