It seems just about every town has a real estate agent that offers some sort of “I’ll buy your house if it doesn’t sell” deal. It’s natural to wonder how this could work – does the agent have dozens of homes they own? Are they just THAT good? Is it a scam?
How It Works
Every agent who offers this has their own details and rules, none of them will just say “list for whatever price you want and I’ll buy it for that price a week later if it hasn’t sold”. The basic gist is that you list according to their specifications and they set the price they’ll buy it off of you for if they don’t sell it during a set period. Usually, the price they’ll buy it off of you for is quite low, so the worst case for them is they buy it off of you, turn around and resell it, and make a small profit doing so.
For example, say you have a $60,000 house that you’ve previously listed with 2 other agents and it hasn’t sold. The agent with this deal might meet with you and tell you that you need to get the house inspected, fix any issues found, get a professional appraisal and use that as the list price, pay to have the home staged, buy a home warranty and give the agent 2 months to sell it. After the appraisal comes back that the house is worth $52,000, the agent agrees that after the 2 months are up they’ll buy it off of you for $40,000 if it hasn’t sold.
For a seller who is convinced that their house is worth $60k, this seems like the agent is stealing $20k from them and forcing them to pay a bunch of cash upfront to boot. From the agent’s perspective, they’re just persuading the seller to do what’s needed to sell their house.
In my view, the only reason real estate doesn’t sell is because it’s mispriced. I’m usually in the agent’s camp that sellers need to be more realistic about their price when a property isn’t selling. I’m ambivalent about the bells and whistles, staging, home warranties, pre-inspections, and whatnot. I consider all of these things as interchangeable with a lower price. With a home warranty, it’s literally interchangeable – you can drop the price of the property by the amount of a home warranty then let the buyers decide for themselves if they want to buy one.
As an aside, a friend was recently selling his house and the buyers kept pushing for him to provide a home warranty (each counter offer they added back the home warranty that he’d removed). He looked into it and found out it would cost $500 for his property. He told them “look if you want the home warranty I’ll buy it for you, but then I’m raising the price by $500”. They didn’t ask for it again.
I somewhat feel like the whole “I’ll buy your house!” is a silly dog and pony show. Agents who offer these deals will admit that they very rarely buy the homes. If the seller agrees to the conditions, the home sells. It feels like it would be more straightforward to just level with the sellers, tell them why their house hasn’t been selling and suggest what they can do for it to sell. That being said, many people are irrational, so if this convoluted approach works who am I to begrudge the people involved.
Conflict of Interest
Some people object to these programs on the grounds that an agent is being hired to sell a property for an owner for the highest price they can get. Buying the property themselves for a low price is at odds with that objective. I don’t have a problem with this, provided everyone involved in the deal is ok with it.
I released a book on Amazon about “Getting Started As A Small Scale Landlord”. It treats this as a part-time job you can give yourself, rather than a get-rich-quick scheme. If you enjoyed this post, I think you’d dig it.
What do you think? Have you ever sold a property with such a guarantee? Agents: what do you think of this approach?