Your home sold guaranteed, or I will buy it for cash gimmicks!
Have you recently come across a Realtor claiming, “Your Home is Sold Guaranteed, or I will buy it for cash”? Yes, of course. This is the latest in Realtors’ gimmicks in today’s market. Let me explain how it works.
In the overwhelmingly hot real estate market in GTA-Ontario during 2016/2017, we saw “Sold Over Asking Prices,” “Record Sold,” “Sold the highest in the Market” and so much more similar adverts flooding the market. It was most upsetting to most of the buyers in the market, and this led the provincial government to finally intervene by introducing 16 measures to cool down the market. But those days are gone, and other developments have come up. First of all, let’s all agree that some Realtors are very innovative when it comes to marketing techniques, but unfortunately, this is usually at the client’s expense.
So, how does the latest gimmick work? Realtors would enter into listing agreement to sell your property based on target sale over a period of time. For instance, the fair estimated market value of your property is $1.0 million, and the Realtor has two ways to pursue the technique, depending on what type of seller you are. For sellers always looking to sell high and above market price, all the Realtor has to do is trap the seller by agreeing to list your property above the market price, e.g. $1.1 million for 3-4 weeks. If not sold, he would reduce the cost to $1.0 million for another 3-4 weeks, and if not sold, he would cut it further to $900 thousand. The property would likely sell at this price. Otherwise, the Realtor would buy it at the end of 90 days as promised. This looks fine on paper, so where is the trick?
Well, this sort of agreement is binding for 90 days or more, and the Realtor is already charging you high commission, e.g. 5-7% overall which is way above your market price including 2.5-4.5% for listing and 2.5% for cooperating brokerage. He was able to convince you of this high commission because he has already guaranteed to buy the property at the end. In this case, when the Realtor does buy it, the full commission goes to the Realtor only.
So, is it possible for the Realtor to be able to buy all the properties he promised to buy? No, but the probability of selling below the market price with 10% or more discount is high, so he doesn’t need to buy it at all. The other option is that a network of investors is already lined up with the Realtor, ready to buy at a discount for a guaranteed profit in the near future. In some cases, private lenders may finance the purchase of the property for the short term at a high rate in order to flip it within one year.
Meanwhile, for those sellers agreeing to list at a fair market price or below market price, the probability of selling it is very high within the 90 days time frame with no need for the Realtor to buy it, but still, the commission charged is very high in the market. Some Realtors recommend for property improvement in terms of staging and renovation at sellers’ cost, but still, they would convince the sellers with the program and might not be fully transparent about the comparisons sold prices which is still not publicly available for the seller to verify.
I am aware of this kind of program, and I know that it claims to be branded, registered and taught by coaches to Realtors who subscribe to this private club. These Realtors, for a fee, are taught how to double or even triple their incomes. Unfortunately, many top Realtors adopt this program which is entirely legal for now. This is because there is no ban on it by any regulator just as there is no ban on multiple representation practices which has made certain top Realtors even richer at their clients’ cost.
So, you tell me, is this line, “your home is sold guaranteed, or I will buy it for cash” a decent sales pitch or is it misleading for sellers who in truth deserve to earn every single dollar they gain from their lifetime investment?