Is this another real estate marketing gimmick or is this for real?
Unfortunately it’s for real and used by many agents all across the country. I can safely say this is a gimmick where I strongly suggest you don't participate!
Why not? Because the Internet is littered with horror stories where this scheme has gone astray to the determent of all involved and frankly the risk to both you and the agent far outweighs any real benefit to either of you. I am personally aware of several agents in my area that use this gimmick and have several listings that are over the time limit they guarantee (and, by the way, they don't own the homes.)
A Look at the Fine Print
To any observant reader a title or graphic promoting this type of offer is easily recognized as a marketing ‘teaser’. While perfectly ethical in an attempt to grab the readers attention, the real story is in the restrictive small print that inevitably follows.
The worst possible implementation of this offer on the Internet, is one where there is no fine print at all, only a lead generation contact form. This practice is far too widespread in my view, and I wish there were local regulations that required details to accompany offers such as this, even if only in small print.
Remember the old adage, ‘If it looks to good to be true, it probably is‘. Most often this is a perfect description of the ultimate result of this offer. Some of the restrictions accompanying this offer include one or more of the following:
- An agreed upon listing price and time-limit
- Home is not purchased by agent until listing expires
- Purchase price to be paid by agent is frequently 80%, or less, of appraisal value or some other extremely low amount. (By the way, who wouldn't buy a home that they could turn around and sell for a 20% profit? The profit that you should have had.)
- The home is under a certain price threshold and not a foreclosure
- Etc., Etc.
Too Good to be True?
The fine print detail, which most often renders this offer immediately ‘too good to be true‘ is the purchase price the agent is willing to pay for your home in the event it does not sell within the agreed upon time-frame. I call it "The Vulture Clause".
The percentage of appraisal mentioned above is a biggie! If you are like me, I wouldn’t want to sell my home at a large percentage off of comparative-market-value much less of the appraised value. If you are like most people, you want the best price you can get in the marketplace. Even if the agent buys it (and I, so far, haven't seen one do it), it's a built-in windfall for him/her, not you!
Another thing to keep in mind is the current market. In this economy many homes are now worth less than the seller owes. In that event they must do what is called a "Short Sale" where the lender allows the homeowner to sell the home for less than they owe. They still, however, want as close to current market value as they can get. They won't just give away the home! An agent offering substantially less than the market value will, almost certainly, be turned down by the lender anyway. They can still say they "tried" to buy it so it isn't their fault even though they knew (or should have known) it would fail before they made the offer.
One horror story described a law suite where the offering agent cancelled the listing contract thereby not letting it expire, and thus by the letter of the contract were not obligated to purchase the home.
My sincere recommendation to any consumer considering entering such a listing contract is have your Attorney look over the contract for potential loopholes that could possibly be utilized to invalidate it by either party without consent of the other. Also, ask for a list of the agent's current listings. See how many are over the time limit the agent says is the point he will buy the home. Those over the limit, ask the agent why he doesn't own them. Many agents depend on your not wanting to go thrugh the process and delay of changing agents after the home has been on the market and they don't make the purchase.
Remember, this is probably the biggest transaction you will have in your life at this time. If your finances, credit and sanity depend on getting this done smoothly, be aware. Trust is a vital part of an agent's value. If an agent isn't honest about this, what else is he/she not going to be honest about?
This gimmick and listing deal is easy to pass on so, BE CAREFUL! It's ultimately up to you but, unless you are satisfied with the price and other details, PASS!!
