You've seen ads like this one below I'm sure:
This is a very popular ad/slogan/gimmick used by agents to get new clients. While some of the agents who make this offer can absolutely afford to buy your house, the vast majority can't.
None of that matters though, because no agent who makes this offer will ever buy your house. And they know it.
What Is Being Offered?
Full disclosure: I took this training program years ago as a young agent and after each training session I felt like I needed a shower.
The ad promises that your home will sell at a price "you agree" to or the agent will buy it.
Intriguing isn't it?
You respond, "Okay, Mr. Top-Producer Agent guy, come by my house tomorrow and give me an offer for my house,"
The Realtor prepares a comparative market analysis for your home and presents it to you in your home. Sometime during the meeting, he finally gives you the "guaranteed sale price" that you can take to your lender to secure financing. Phew! Now you will not have to own 2 homes at the same time.
Sounds great!! Sign me up!
What's The Catch?
The only catch is that if you agree to the price you're offered "in writing" you need to have your head examined. The offer is supposed to give you piece of mind but it will be more like a piece of crap.
The "Your Home Sold Guaranteed" price is determined by the Current Market Value minus 5% for commission and a further 5% or 10% is deducted to ensure that the agent will never actually have to purchase it. There are other conditions as well (see below) that need to be satisfied in order for you to qualify for the guaranteed home sale.
When the ad promises to sell your home at a price "you agree to" or the agent will buy it, they know nobody will "agree to" a price of 10-15% below market value with a closing in 120 days or more. Especially in the GTA!
However, the agent doesn't care that you don't agree to that price. They don't get paid by buying your house, they get paid by selling your house.
Who Came Up With This?
This ad is the cornerstone of the Craig Proctor training program for Realtors. Proctor is a former Realtor from Newmarket who really was a visionary for his time. He used to crush it back in the 80's and 90's by using automated voicemails to provide property info well before the internet was a thing. His marketing was cutting edge and geared mostly around telephone and print ads to attract new clients.
He also was the first person to advertise the "Your Home Sold Or I'll Buy It" gimmick which is probably what he's best known for now.
In the 80's and 90's, multiple offers were not a thing and people had to use escape clauses and SPP clauses to put deals together. Back then, having someone guarantee the sale price of your home was much more of a big deal than it is today.
Now Craig Proctor makes his living teaching Realtors how to generate leads using his methods and has other real estate ventures as well.
The Terms and Conditions (Loopholes)
When I took the training I was instructed to include clauses that created these loopholes so that you would never actually have to purchase the home.
- Excessive Marketing Time and Closing Date- minimum 60 days to market the home and a minimum 60-day closing. That's an extraordinary amount of time in today's market and makes it prohibitive for most people.
- Declining an offer that is the same or more than the guaranteed sale price relieves the agent from his obligation to purchase your property. This leaves the door open to people making fake offers early in the listing period to absolve the agent from having to complete the purchase. This has happened.
- Agent can assign your Agreement Of Purchase to another buyer and essentially flip your property during the 60 day closing period.
- Systematic Price Reductions every two weeks
- Seller has to pay for professional staging (at their expense)
- All repairs to property deemed "necessary" by Realtor must be completed prior to listing.
Seems like a bit much doesn't it?
You're right. That's why nearly 100% of leads generated using this program DO NOT go forward with the guaranteed offer.
Bait And Switch
Of course, after reading all the terms and conditions you don't want this terrible offer. Now the agnet will say something like, "Well, let me assure you that this offer will be here if you need it."
"Thanks bud! When I want to sell my home for 15% below market value, I know where to find you." You would never accept an offer like that in the Greater Toronto area and the agent knows it. It's just a grimy way to do business.
Now that this agent is in your living room and has given you a listing presentation, the chances are good you're going to hire them with or without the price guarantee.
And that's what this ad is geared to do; to get an agent into your living room (under false pretenses) hoping you will choose them to be your Realtor.
It's the classic bait and switch.
And it's shady.
What do you think? Feel free to comment below.