Can agents buy a home if they can’t sell it?
Can agents advertise that they will buy your home if they can’t sell it?
This is a marketing strategy sometimes used by real estate agents and brokerages. Perhaps you saw an ad like this in your mailbox, your local newspaper, on a bus or in a bus shelter, or on social media.
Hiring an agent and signing on with a brokerage that advertises this type of program can give sellers some peace of mind that their home will be sold by a certain date and at a price point they have agreed on. This can be particularly appealing if:
- the market is cool or cooling (a “buyer’s market”)
- you have bought another property, are unable to secure bridge financing, and would like to avoid carrying two mortgages at the same time, or
- you would feel more comfortable knowing you will receive a predetermined amount of money by a certain date, regardless of market conditions and the level of interest potential buyers may have in your home
Having said all that, if this is something you are seriously considering, I would encourage you to take a few key things into account as you make your decision.
A guaranteed price and a list price are not the same. The price you choose to list your property for sale and the price that an agent might offer under these types of programs will likely be different. In fact, I would like to flag that typically the offers serve as a safety net, but are not necessarily highly competitive.
Understand what the brokerage’s offer amount is based on, to make sure how it compares to the market. Ask your agent to do a comparative market analysis to compare similar homes that are currently listed or have recently sold within your area. The analysis would include researching homes that are similar in size, construction, style, condition and features. This will help you have a realistic estimate of the current approximate value of your home.
Understand the terms of the agreement. If listing your home with a “we’ll sell it or we’ll buy it” guarantee is a key consideration for you, it is crucial that you read and fully understand the fine print. For instance, confirm what fees, if any, might apply to the guaranteed purchase or whether you are obligated to sell to the brokerage if you don’t get a better offer. Because of this, I strongly recommend that you consult a lawyer who is insured to practice real estate law. They can review your contract and go over the terms with you so that you can feel assured that you are making an informed choice.
You can expect agents and brokerages that participate in this marketing strategy to uphold their fiduciary duty to always act in your best interests as their client. This includes actively seeking out potential buyers for your home and fulfilling commitments made as a seller’s agent throughout negotiations.
If you end up moving forward with your agent’s guaranteed offer, you can expect them to fully disclose their personal interest in the purchase and document all conditions or fees.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.