In Real Estate, you will often come across a program used by brokerages in that they will offer you a guaranteed sale. On the surface, this means that they are so confident in their ability to sell your home that if it does not sell for X days, they will then purchase it at a predetermined price. However, the downside of this agreement is that there is often a lot of red tape involved preventing the home seller from utilizing the program.
In Alberta, a guaranteed sale program can only be offered by real estate brokerages and must be able to be offered by all agents within that brokerage.
What are the benefits of a guaranteed sale program?
Believe it or not, the most significant benefit of a guaranteed home sale program is to the REALTOR® offering the program as it gets clients in the door. As a home seller, if you engage in a guaranteed sale, the benefits can include:
Peace of Mind:
You know that your house will eventually be sold for a price that is agreed upon beforehand, although this may be less than you expect.
Move Date is More Concrete:
Your house may sell at a market price, but if it does not then you have a definite date that your house will be sold by. This allows for better planning and can help you avoid carrying two mortgages for an extended period if you’re already planning on purchasing your next home.
How can a guaranteed sale program be a scam?
Home sellers often don’t read the fine print before inviting an agent to take a look at their home. Many guaranteed home sale programs never intend to purchase the house so they contain home age, size, price, or additional commission caveats. As a result, the actual usage of the guaranteed sales program ends up being relatively low.
Things to watch for:
Initial Pricing
The contract may stipulate that the home must be listed for 3-5% less than market value. While this may be a smart way to price your home in a ‘sellers market’ where you may receive multiple offers, in a ‘buyers market’ (where you would receive the most benefit from a guaranteed sale), you are less likely to receive multiple offers and may just be taking a price cut.
Subsequent Price Cuts
Some contracts may have a ladder of price cuts baked into the contract. This could be written a variety of different ways, such as 5-10% every 30-60 days. After a few months, you could be listing your home for 70% of what the original perceived market value was, and this may be the price that you end up contractually selling your home for.
Home is Outside of Program
Many real estate professionals will utilize a guaranteed home sale program to get their foot in the door with potential clients with little intention of offering the guaranteed sale. Once they have spoken with the home seller, they may point out a variety of fine print that prevents the home from being sold using the program.
How do guaranteed home sale programs work?
Because of issues in the past with guaranteed sales, the Real Estate Council of Alberta has outlined a few rules in order to make the process more trustworthy.
When a brokerage enters into a guaranteed sale, they must:
- Draw up a purchase price, date of possession, and terms/conditions of the sale.
- Place 5% of the total purchase price into a separate trust account. Once the transaction is completed, it can be released from trust.
- They must hold the money in trust for the seller.
- If the home utilizes the guaranteed sale, then the brokerage cannot charge a commission.
- Real estate professionals are not allowed to say that someone will purchase the home on their behalf after X amount of days when a guaranteed home sale program is not in place i.e. ‘If your house hasn’t sold within X time, then I’ll purchase it myself’.
Note: If a real estate brokerage offers a guaranteed sales program, they must disclose the purchase price formula on either the advertisement, website, or direct the seller to where it may be available. Typically the more open they are with the formula, the more likely they are to move forward with the program. Example – If it is only available via fax, then they are likely hiding something.
Reference – Guaranteed Sales Agreements (RECA)
Difference between a guaranteed home sale program and an iBuyer
A guaranteed sale program attempts to sell your home first, and when it doesn’t sell, will purchase it from you for an agreed-upon price that is often less than market value. This is fundamentally different from an iBuyer in that an iBuyer purchases your home for an upfront fee on the day that you choose at a price that you agree to beforehand.
At Sweetly, our fees are in line with what a regular real estate commission would cost with no hidden fees.
Sweetly’s Models
Sweet Sale
With the Sweet Sale, you get a Fair Price Cash Offer. It’s a fair offer that lets you sell without showings and choose your own moving day.
Start your sale with a Free, Fair Price Cash Offer, which remains open to you for 60 days. Activate our offer any time – even without listing/showing your home, or at some later date if your home isn’t selling. Compare our hassle-free, all-Cash offer to a traditional MLS® listing. Make an informed decision. Choose what’s best for you. Offers remain open to our customers for 60 days. Our offer is withdrawn if you list with an outside REALTOR®.
Listing With Confidence
A traditional listing allows you to test the market with your price. A listing with Sweetly comes with it’s own set of perks.
- Test the market with confidence, knowing you’ll have a Sweet Sale available if your home doesn’t sell.
Start with an fair price cash offer to know the current value of your home. Then, decide ‘how’ you want to sell, BUT before you do, you can shop at your pace to find the right house. Beat out any competing buyer because you won’t need a ‘condition of sale’ so your offers are stronger without spending extra money. Once you have a firm purchase you can sell your house to Sweetly on a day that works best for you.
