Some Brokerages and Realtors use Guaranteed Sales Programs as a marketing tool to get more leads. As you will see from the article below (found on the Real Estate Council of Alberta’s website) website – RECA) this is rarely the best option for consumers, which is why CIR REALTY firmly stands against it and will never adopt this as a sales or marketing strategy.
Here is the article that is on RECA’S website and is written as a consumer facing article to help them understand what this program really means if they choose to sell with someone who offers it.
….Wary might not be the best word, but you do need to make sure you understand the details of the offer. This type of offer is a guaranteed sales agreement, and while there is nothing illegal or wrong with a real estate company offering this kind of arrangement, it is rarely the best option for consumers.
In a guaranteed sales agreement, a real estate brokerage agrees to buy a piece of real estate from a seller at a previously agreed upon price, if it hasn’t sold to someone else before a certain date. Only real estate brokerages can offer these agreements, not individual real estate professionals.
If you’re selling your home to buy another one, you may be interested in a guaranteed sales agreement for the home you own now. It could help you avoid owning two homes and paying two mortgages. A guaranteed sales agreement might give you the confidence to proceed with your new home purchase before selling your current one.
What sellers need to keep in mind in these arrangements is that the real estate brokerage wants to minimize its risk.
For example, it’s rare that a guaranteed purchase price will be based on the property’s listing price or the property’s market value. In most cases, the brokerage calculates the guaranteed purchase price using a formula where legal fees, carrying cost, and commission on the resale are subtracted from the purchase price. This minimizes the brokerage’s risk, but it can also greatly reduce how much that seller receives for their home.
Brokerages that offer guaranteed sales programs are required to have policies for those programs. Those policies should include how the brokerage sets the guaranteed sales price and who is in control of the property’s listing price during the listing period; it may not be the seller. It’s not unusual for a guaranteed sales agreement to include a clause that requires a seller to lower their listing price during the term of the listing. Remember, your real estate brokerage wants to minimize its risk. It prefers to sell your property to a buyer rather than to use the guaranteed sales agreement, and lowering the listing price can sometimes help that happen.
If your real estate brokerage offers you a guaranteed sale agreement, it’s up to you to decide whether you’re interested. Before you do, make sure you read and understand all of the fine print.
“Ask Charles” is a monthly question and answer column by Charles Stevenson, Director of Professional Standards with the Real Estate Council of Alberta (RECA). RECA is the independent, non-government agency responsible for the regulation of Alberta’srealestate industry. We license, govern, and set the standards of practice for all real estate, mortgage brokerage, and real estate appraisal professionals in Alberta. To submit a question, email [email protected].
