Guaranteed Sales

Hi, let’s talk about guaranteed sales, the problems, the pitfalls, the good, the bad, and the ugly.

Now, if you own your home and you’re thinking about a move you might be considering a guaranteed home sale, I mean, looking into them at least.

Now, what’s a guaranteed home sale? A guaranteed home sale is just that—it guarantees, it backstops you. So you could go out and write an offer without the condition of the sale of your home. And of course, you probably have financing and inspection conditions and those sort of things as well. But the sale of your home is a big one, and if you can eliminate it, you’ve got a far better chance of being able to have your offer accepted, that’s for sure.

So why, what’s the reason for guaranteed sales? Well, if you think about it, you think it through, you’ve got a catch-22 situation. Do you buy first or do you sell first? ‘Cause if you buy first, you risk not having your house sold and being in a situation, or if you sell first, then you risk having to buy something just to get into it and really not get the property that you want. And that’s probably the reason you’re moving, is for a few extra features, a few extra square feet, and maybe a better location. Right?

So I’ve, I’m a realtor, granted, but in the last five purchases that I’ve made, I have purchased the house before I’ve sold mine, and there’s a reason for that. We’ll talk about that in a little bit. But let’s talk about now how the guaranteed program works a little bit, kind of the structure of it.

So, so a guarantee from a realtor is not from a realtor. A realtor cannot legally offer a guaranteed sale, personally, or through his corporation. It has to be through the brokerage that he works for. So, so these big billboard guys and stuff, they don’t have any more inside track on guaranteeing your home because their pockets are extra deep and they’re rolling in cash, presumably, than any other realtor. The brokerage has to offer it. So that’s the first thing.

So how, how are they structured? What’s the meat and potatoes of it? Now, the re/max office that I was at previously, the broker was quite proud of the fact that he was the one that had designed the framework that pretty much every other guarantee sale program in the city uses. And so he’d been using it for over 20 years. And at one point, with great pride, he said to me, in over 20 years of using the program, I have not taken one, not one house in on a guarantee. That’s, that’s pretty crazy. Not even one.

So how does he do that? Well, first of all, you know, you go, say you had me in and I, I priced your house and I, I did not offer guarantees and I do not offer guarantees. But let’s say you had somebody else in and they price your house for you. So you come up with a price and it’s accurate, then the broker would make an assessment as to what his price would be.

So that price is going to be far lower, and it’s gonna be at a price that you probably think like you could sell your house, like fallen off a log and have people lined up at the door at that price if you had to sell it for that number. And the reason for that is because ultimately the broker does not want to take your, does not actually take your house in trade or take it in as a guarantee. So you have to agree to the price that advertising is absolutely true.

But the fact is, if you don’t agree to the price, then you’re not allowed. You don’t qualify to go in for the guarantee. Broker as well charges 1%, it’s 1% of the sale price, whether you end up using the guarantee, implementing it or not, it’s just to have it in place. Now, that’s not the whole deal. I mean, you still pay full commissions in GST and that as well in addition to that 1%. So you’re not getting off the hook there as well. And you have to be paying full commissions plus.

Now, another point that I should mention is you can’t put your house on MLS, you can’t list it for a while and then decide after a while that you want to go into the guarantee program. You have to do it first time upfront or it’s no go.

So that’s kind of the way it’s structured.

So, does it help some of the people, some people? Well, yeah, in some cases, potentially. When you don’t have enough equity to cover your downside, it makes sense to go ahead with the guarantee because you can go out and you can make an offer without it being conditional to the sale of your home. Of course, typically conditional to financing and inspection and those sort of things, for sure. But it’s a little bit counterintuitive because the price that they offer is so low that oftentimes if you don’t have that much equity, then you’re not gonna come out of it with your down payment so that you can go ahead and buy the next one.

So, you know, it does help some of the people, some of the time, you know, you’d have somebody like myself go in, we price the house accurately and then we look at the market statistics first. Like I say, we have to make sure that you have enough equity so that there’s some room there and you can afford to take the risk on yourself.

We go through the market statistics, we look at the competition, we look at the recent sales, of course, I look at the absorption rate, we look at the 90 day odds of sale, as well as the vacancy rate, which is vacancy of active listings, not of rentals. Has nothing to do with rentals.

So we come together with all that information, we present it to you, we work together through what we feel is our best educated guess as to what the maximum downsize would be. And that’s, you’re not gonna know anything for sure. It’s just a matter of working through, working through the numbers, working through the statistics, and coming up with a kind of a worst case scenario. So if your house is worth seven 50, maybe that price is 707 and a quarter. It’d have to be a big drop if you were dropping 50,000 from an accurate evaluation price. For sure.

So, yeah. Well, let’s talk about why, why, why do, why do realtors wanna offer a guarantee? Well, it’s about marketing. That’s why they put it on the big billboards and the bus benches and that, because it’s a hook, because people are concerned about that. Catch 22, do you buy first or sell first? And in a busy market, as I said, sometimes you just have to be back benched, you know?

So, but ultimately for realtors, what it is, is a hook. It’s a hook to get you to call. It’s a hook so they can get in your door and they can get your business ultimately. But I don’t, I never felt comfortable with it. That’s why I never did it, because it, to me, it wasn’t an honest way to get in your door when you knew darn well that it wasn’t gonna work for most people. And then as well, that it was very expensive for people to implement.

So like I say, I don’t wanna discount it totally because it worked for some people some of the time.

Anyways, that’s it. That’s what guaranteed sales are about. If you have any questions, concerns, or just like to chat with a real question, email, message, text, you know, whatever works for you.

Hope you have a great day and we’ll see you on the next one. Bye for now.