Have you ever had a houseful of ravenously hungry teenagers threatening to eat you out of house and home? If you didn’t have the local pizza joint on speed dial, you probably hopped online and called some place with an ad that made an offer you couldn’t refuse: “Delivery in 30 minutes or it’s free!” It made sense because if you made them wait more than 30 minutes, your entire grocery budget for the week might have been decimated.
A pizza restaurant making that offer would soon go out of business if they didn’t qualify customers for their offer to ensure that they don’t have to give away free food. For example, the offer is only good within a 10-minute drive to their location, and it doesn’t apply if you order certain menu items. Furthermore, all bets are off during a snowstorm, because they don’t want to risk the safety of their drivers or their income.
What does any of that have to do with real estate?
If you’ve ever sold a house under pressure, you’ve felt the knot in the pit of your stomach from worrying whether or not you would meet your deadline. Maybe it’s because of a job transfer, a layoff, family circumstances, or other personal matters – but whatever your motivation, adding pressure to the already stressful process of selling and moving can be overwhelming. At this point, a little reassurance goes a long way.
In this frame of mind, you may come across a banner: YOUR HOME SOLD OR I WILL BUY IT. You may wonder how that program works. Could this be the safety net you need to take the pressure off? Perhaps….but make sure you get all the facts.
It is important to note that the guarantee is not available on every property, because just like the pizza shop, a Realtor offering this option will most definitely qualify your home first. You will absolutely have to pay for a home inspection to ensure that there are no latent defects that might interfere with the saleability of the property. To put it bluntly, he doesn’t want to buy your house any more than the pizza shop wants to feed your teenagers for you. A sales representative’s goal is (as it should be!) to sell your property for the highest price it can get on the open market, within your circumstances.
Having said that, any guaranteed sale price will be well below current market value, and likely subject to change during the course of the contract. Of course, if you get an offer that is higher than the GSP, you will accept that, and the guarantee will not have to be invoked.
Many programs require that you agree to regular price reductions during your marketing period until you are listed at the guaranteed, below-market-value price. In addition to this, even when you are promised a sale ‘within 30 days,’ the fine print probably says it will not close until 90 days later, which is 120 days after you first listed it.
The reality of the current market in Hamilton/Burlington is that saleable listings move quickly. The Canadian Real Estate Association (CREA) posted statistics for 2016:
“The average number of days on market decreased from 41 to 30 days in the freehold market and from 36 to 17 days in the condominium market, compared to December of last year.”
This is an average, including problematic properties that may have taken a bit longer to sell due to extenuating circumstances or deficiencies. The timeline would be even shorter if we only considered “qualified” homes. [Read CREA’s report here.]
Some contracts are quite restrictive: They may actually require that you purchase one of your representative’s own listings. This clearly limits your options, even if your agent has more listings than anyone else in town.
Realistically, if you decide to allow your Realtor to buy your home, they will simply re-sell it for a profit, possibly even assigning the contract to a new buyer before the deal closes. If you think you might be uncomfortable, or even angry about that, please think long and hard about signing up for a guaranteed sale. If you are willing to sell below market value in order to accomplish a personal goal, it is perfectly acceptable to list your home at a lower price to attract interest. Current demand is still higher than available supply, so you can be optimistic about the potential for success. (It is not unheard of to receive multiple offers – in fact, in many neighbourhoods, it is the norm!)
Interestingly, if you research sales representatives who offer GSP programs, you will find many who say that most of their sellers do not sign up for the program at all! Clients may choose to work with that agent or his/her team, but the very offer that moved them to call in the first place was not what it seemed.
Our opinion is that a “guarantee” is unnecessary if a property is priced realistically and marketed effectively.
In other words, whether they told you this or not: Your pizza would have been on your doorstep within 30 minutes anyway.
The primary purpose of any guarantee is peace of mind. If you meet with an agent who offers a Guaranteed Sold program that gives you that peace, and you feel that they are trustworthy, it may be a good option for you. In our current market, though, the fit between you and your representative – and a meeting of the minds on how best to market your property to get the best price for your house is much more important than any “guarantee.”