Home Seller Guarantees

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Question:

How can an agent guarantee that your home will be sold in a certain amount of time?

Hint:

It has something to do with price.

     

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We’ve all seen the ads on billboards and in magazines, on bus benches and in the newspaper. Real estate agents who will guarantee to sell your home in __ days or they will (SELL IT FREE/Pay You Money/Buy It)!!

So how can an agent gurantee that the home will sell? Well, let’s think about this.

If you are an agent and you sign a written guarantee with a home seller saying that if their home does not sell in 60 days you will pay them or buy the house, how would you want to price that home?

My guess is that most agents who guarantee they will sell a home price it lower than the top its market potential, to ensure the sale.

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The reality is that nobody can predict the future. A guarantee that a home will sell in a certain time frame is a gamble. Even with all the marketing in the world it comes down to this- they are betting they can sell it in that amount of time. And because they are signing a written guarantee my guess is they might want to hedge their bet by pricing it lower than it normally would be priced.

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Sometimes a home seller needs to sell as fast as possible for some reason. In those cases they will probably be expecting to offer the home at a lower-than-market price. But in my experience, most sellers would rather sell for as much as possible, not as quickly as possible. When I have a listing that sells to the first buyer who looks at it or the first week it is on the market, many times the sellers are wondering if they under-priced it. And I would too. Sometimes the right buyer just happened to see it at the beginning of the listing period, but if I listed my own home and received three offers the first weekend and they were for more than my listing price I might wonder if I priced it low.

I’d rather sell my home for $325,000 in 64 days than $299,900 in 4 days. And I wouldn’t guarantee that I can sell a home in ___ days unless I knew it was priced pretty well for the market and area. Not that everyone who markets this service is under-pricing homes, but I think by guaranteeing a sale, it makes it more likely that they would.

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How about you?

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14 thoughts on “Home Seller Guarantees

  1. Greg – we use this marketing strategy. We don’t low ball the price. We present the seller with a comprehensive overview of the market and we discuss market value of the house. If the house is priced right for the market and we cover all the marketing bases, the house usually sells within or earlier than the norm. One thing is for certain – you can’t accept an unrealistic valuation from the owner just to get the listing and then work to get them to come down to reality if you use this strategy.

  2. John,

    I saw your post about Dublin Ranch’s golf course. You know I actually built the first website about Dublin Ranch about 7 years ago. I built it and then when I moved back to Salt Lake City I sold it to some agents in the company. It’s still up today and they use it, although they haven’t changed it at all so it still looks like a website that was built 7 years ago. The site is DublinRanchNews.com

    Thank you for mentioning how you offer a guarantee. How does it work and what are the terms?

  3. Now for something completely different….

    There is an agent in my marketplace that does the sales guarantee thing. If you want to purchase one of their listings and have a place to sell, they will guarantee the sale within 120 days (yes we are slow here in Michigan). The market value is agreed upon at the listing table and the listing agent agrees to purchase the property for 95% of the market value with their commission still thrown in the mix. The kicker here is that the agent who offers this carries a couple of decent lines of credit so can purchase nearly anything with cash and not worry about appraisals.

    As I understand it, they have yet to purchase a property.

  4. ERA has a guarantee where they will purchase a home if it doesn’t sell also. The property has to meet a bunch of requirements (one of them being the price which is agreed upon).

    A friend of mine who used to be an owner of an ERA franchise told me that in all the years the company has offered the guarantee it has never purchase a home.

    Nothing wrong with offering a guarantee, I’m just talking about how it can be offered.

    Black Tie Todd- that agent may be setting themselves up well. If they purchase the property for 5% under market value plus they have a 6% commission margin built in they would minimize their risk and be able to offer the guarantee to their sellers.

    Mike- that’s actually not a bad name for a blog (or it’s tagline)- maybe I’ll use that someday.

  5. Hi Greg,

    Thanks for your reply to my blog on Dublin Ranch Golf course and the info you sent in your reply to my brother about the website you developed. I will definitely check it out.

    As for your perspective on the Your Home Sold in 60 Days or We’ll Pay You $5,000 Cash (our USP), I think you are presenting the view that its all about price and that one strategy fits all. I doubt that that is what you mean or how you run your business as we must appeal to all types of buyers and sellers with a plethora of objectives and personal interests. If you are the type of buyer who would rather get $325,000 in 64 days than $299,900 in 4 days, then I would develop a different campaign to appeal to you and I would price the home to achieve that objective. However, there are buyers out there who need to relocate, get out from under a heavy mortgage burden or have dozens of other reasons on why time is a factor. This type of offer is geared to them. Then, we customize the marketing strategy and pricing to accomplish this. Our objective is to prioritize what is most important to the client (price vs. time on the market) and then deliver. It is somewhat of a guessing game, but we do stand behind our guarantee and if we don’t achieve the objective, then we pay up.

  6. Spot on insights about the guarantees. I am a real estate agent and there is an agent in my office who uses this sort of guarantee. He told me that basically it’s a way to get in the door and then he explains the program and how it works. The price is set by an appraisal and then he guarantees that if he can’t secure an offer by 60 days he will do it for free, no commission. He uses an appraiser that he knows is conservative to make sure the price won’t be to high. The only problem is that he pushes the sellers to take lower offers so he won’t have to lose the commission. I don’t think his intentions are bad but I have over heard him saying things (my office is next to his).

    For someone who really needs to sell it is a good program.

  7. Greg – are Craig and I confusing you yet? My brother has decided to join me in posting to the Harper Team blog. He’s a golf fanatic and also likes to bowl so he’ll be chiming in on that as well.
    I love the occasional annoynmous comment – keeps me interested in psycho-dynamics.
    The repartee between you and Mike was the highlight of my day!

  8. Thanks John,

    Hey we’re all doing our best to do good business. I can see how the guarantee program could give some peace of mind to someone who really needs to sell.

    One positive behind it would be that it puts pressure on the agent to get the home sold instead of resting and waiting.

    What type of sellers usually choose this program, and what are the results versus sellers who do not choose this program?

  9. Greg – The buyers do not fit any one category. This type of marketing helps to reassure people and helps them to make a decision. Buyers and sellers want agents that look at their situation as unique, they want agents that are proactive and not “business as usual,” they want enthusiasm, creativity and integrity. In short, they want The Harper Team but we can beat everywhere!

  10. Greg: What you describe is also practiced in the San Diego area, with slight variations. Basically, the listed home must be priced five percent below the nearest model match. Commission is 7 percent, with generous offering to selling agent.

    Our market, though, is strengthening and market time is shrinking (along with the gimmicks).

  11. I use different guarantees for different markets. The big thing about the guarantee is if it is not a good deal for me with my commission, how can it be a good deal for a buyer?

  12. Haven’t seen too many guarantees around recently, obviously market conditions are a big factor. I do like the guarantee concept and it does play well with consumers, expect to see more of them when conditions improve

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