Key Takeaways

  • Guaranteed sale programs offer sellers a fallback sale price if their home doesn't sell on the open market within a set timeframe.
  • These programs provide peace of mind but typically come with trade-offs such as a lower-than-market-value purchase price.
  • Real estate agents use them as lead generation and marketing tools, often targeting motivated sellers.
  • Not all sellers qualify, and restrictions or eligibility requirements usually apply.
  • Alternative options like iBuyers or home trade-in programs may offer more flexibility.
  • It's critical for sellers to understand the terms and seek legal review before committing.

A guaranteed sale is a type of real estate agreement in which a real estate agency agrees to purchase a property from the seller for a specific amount if it goes unsold for a certain time period. Also called a guaranteed purchase contract, this type of listing agreement typically represents a significant decrease from the property's original listing price.

This type of contract is used as a profitable marketing strategy which provides the seller with a valuable guarantee and gives the agency an edge over competitors. However, it's important to read the fine print before moving forward with a guaranteed sale contract.

Advantages of Guaranteed Sale

If you're a real estate agent, using guaranteed sale as a marketing promotion will typically work in your favor. Some of the benefits of this tactic include:

  • Low-risk lead generation; even though many of the leads may not use this program, you've already gathered their information and started the conversation, which can still lead to a sales contract.
  • Provides peace of mind for sellers by giving them a specific deadline by which their home will be sold. This helps them avoid the limbo of searching for a new home while trying to sell their former property.

For this type of contract to work well, however, the terms of the guaranteed purchase must be fair to the seller. Seller advantages of this type of contract include the following:

  • If you're looking for another home, you may worry that you'll find the perfect property before your existing house sells, meaning you'll either lose out on your dream home or get stuck paying two mortgages. A guaranteed sales contract can help you solve this issue if you're OK with the home selling for less than market value.
  • The agency will continue to market your home until the guaranteed sale date since it's in their best interest to find a buyer.

It's important to closely review the terms of the agreement before signing.

Cautions of Guaranteed Sale

This type of promotion can come off as a gimmick, which may promote distrust in potential clients. Because they are asking you to sell one of their most valuable assets, they need to feel sure that you are acting in their best interests.

You can change this perception by ensuring that the contract provides the seller with a fair deal. Taking a sky-high commission percentage or purchasing the home for a price well below market value gives the seller the short end of the stick--and you'll lose out on the referrals and positive reviews they may have provided.

It's also important to understand the personal risk and be prepared to purchase the property if it does not sell. The smaller your agency, the higher your individual risk. If you work for a top-producing team, you're more likely to have access to capital to buy and resell the property quickly.

In addition, this program should only be offered to a limited number of buyers; if none of the houses sell, you are in danger of breaching the contract.

Best Practices

  • Be reasonable when creating the contract, especially when it comes to the fine print. Many guaranteed sale contracts list the house slightly below market value (3 to 5 percent) and deduct it by an additional 5 to 10 percent every 30 days. If the house hasn't sold when the contract expires, the agency will purchase it for less than 70 percent of the market value. Keep in mind that if you go too low, you'll generate revenue but will damage goodwill with the client. He or she is unlikely to use your services again or recommend you to friends and family.
  • Consider a variation of this type of contract in which you sell the house for free if it isn't sold in a specific amount of time.
  • Make sure you can deliver on the promises you're offering. These contracts work best for top-producing real estate teams because they usually sell the house without having to buy it themselves. Take an honest look at your track record of selling homes within 30, 60, or 90 days and use this data to structure a reasonable contract.

Additional Considerations and Alternatives

When evaluating a guaranteed sale option, it’s essential to understand that not all programs are created equal. Some agencies work with third-party investors who provide the guaranteed purchase, while others use their own capital. This can affect both the speed and the security of the transaction.

Not all homes qualify for guaranteed sale programs. Typically, eligibility is limited to properties that meet specific criteria, such as:

  • Location in high-demand or stable markets
  • Homes within a certain price range or condition
  • Owner-occupied properties rather than investment homes

Additionally, sellers should ask about:

  • Inspection requirements and whether any repairs are mandatory before a guaranteed offer is extended
  • Whether the guaranteed offer amount adjusts for appraised value or home condition
  • The possibility of canceling the agreement and any associated penalties

Alternative Options:For homeowners seeking similar certainty without the downsides of a guaranteed sale, consider these alternatives:

  • iBuyers: Companies like Opendoor or Offerpad provide cash offers directly to homeowners, with the convenience of fast closings.
  • Bridge Loans: These allow homeowners to purchase a new home before their current one sells, offering flexibility without compromising on sale price.
  • Trade-In Programs: Some real estate firms offer programs that let homeowners “trade in” their existing property when buying a new one through the same brokerage.

Before deciding, it’s wise to compare all available options and seek guidance from a legal professional or real estate attorney.

Frequently Asked Questions

  1. What is a guaranteed sale in real estate?
    It’s a program where a real estate agent or brokerage agrees to buy your home for a preset price if it doesn’t sell within a specific period.
  2. How does a guaranteed sale benefit me as a seller?
    It provides peace of mind and ensures a sale by a specific deadline, which is helpful if you're relocating or buying another home.
  3. Are there any downsides to a guaranteed sale program?
    Yes. The guaranteed price is usually below market value, and not all homes qualify. Additional conditions and fees may also apply.
  4. Do I need to meet certain criteria to qualify for a guaranteed sale?
    Most programs require that your home is in good condition, located in a desirable market, and listed within a specific price range.
  5. Are there other ways to sell my home quickly with less risk?
    Yes. iBuyers, bridge loans, and trade-in programs are viable alternatives that may offer greater flexibility and a better price.

If you need help with a guaranteed sale contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.