What does it mean when a realtor or brokerage guarantees a sale     

Every realtor and brokerage offering this plan has a different guarantee. It’s not a one size fits all guaranteed house sale. Be sure you understand what contract you are signing well before you sign it. 

Let’s jump into the “how it works”. WE will lay this out in steps for you so it is easier to understand. 

 

PART ONE: How A Guaranteed Sale Works

 

An agent or their Real Estate Brokerage will decide if they would like to offer a guarantee to the vendor (home owner) based on some of the following reasons:

1. Because the vendor (homeowner) is upgrading to a larger home. By offering a guarantee, the agent is assured that the vendor will deal with you. This is a condition of the guarantee. 
2. Because the vendor is buying a new home from you and your builder.
3. Because you want to get the vendors listing who is moving away and refer them to another agent for a referral. 

 

PART TWO: What’s The Next Step

 

The agent then needs to contact the owner of their brokerage and let them know that they have a guarantee placed on the property. They (the agent) will prepare a thorough market analysis and present it to their owner. 

 

An appraisal of the property needs to be completed. Once the appraisal is completed, the final net guarantee price is offered. If a guarantee is offered, a cost of 1% is then charged if the seller accepts the guarantee.

 

PART THREE: The Fine Print

The guarantee to the vendor will be a net guarantee with the vendor responsible for all legal and mortgage payout costs as well as commissions. The listings will then be taken for a minimum of 90 days or more depending on area and time of year before the guarantee takes effect. 

 

The vendor (home seller) must pre-sign 3 price reductions that will be submitted to the board every 30 days reducing the price of the property.

 

The last 30 days prior to the guarantee taking affect the guarantee company will be given full control and authority to do whatever is necessary to sell the property as far as price is concerned.

 

PART FOUR: If The Home does not sell

 

If the home does not sell the guarantee company will take possession of the home on or after the guarantee date. Once that happens, the agent is responsible for:

 

1. All legal costs
2. Required administrative costs
3. Costs related to the upkeep and inspection of the home
4. Interest payments and services on the bank loan

 

PART FIVE: Fee’s

 

The agent will sign a letter of direction to the brokerage directing that the 1% fee be deducted from the selling price of the home the clients are listing as a fee to the guarantee company. This may be paid by either the agent or the seller or shared by both.

 

The entire selling commission will be held in trust until the sale of the guaranteed property is completed. The agent will also sign an agreement stating that they will be responsible for any loss resulting from a sale below the guarantee price upon the payout of the house. 

 

Things to note:

 

** If the agent is working with a home builder, the agent may wish to work out a cost sharing agreement with the builder, as the guarantee plan assures the new home builder of a sale. 

 

** The forms incorporated into the guarantee plan include

1. Power of attorney
2. Indemnity of sales associate
3. Sales associate agreement
4. Guarantee agreement of purchase and sale

 

The Take Away from “Guaranteed Listings”:

 

• The house sale is usually 15-20% minimum under market value guarantee

 

• Some won’t guarantee a home over $450,000

 

• House needs to be listed usually a minimum 3 months

 

• Homeowners are usually asked to reduce every two weeks

 

• Many fees and commissions are included in this guarantee

 

• We don’t suggest this for our client’s

 

As always, if you need help buying or selling your home, contact Gregg Bamford or Ryan Bamford.