Real Estate Brokers is this legal in your STATE
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesReal Estate Brokers is this legal in your STATE
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I know multiple RE investor/agents offering a "guaranteed sale program". Nothing wrong with that - it combines the benefits of the 2 main strategies (cash purchase vs. listing) and gives the seller options that a single strategy would not provide. That's why people doing this might beat you in your market.
And OF COURSE they would buy the house for cash at a DISCOUNT. Are any of you guys running a "non-profit real estate company"? Of course not. Investors don't pay retail for houses. That's not hard to understand.
There is a challenge tho when a licensed investor tries to present these two strategies side by side. If I say, I can give you $75K cash right now, or list if for $100K, people do tend to focus on the value being $100K even tho no one has yet offered that for their house. I've seen several different approaches to this to try to separate the cash offer and listing, rather than combine the 2 in a guaranteed sale offer. One approach is a non-licensed buyer goes out, meets the seller, and makes the cash offer. If that doesn't meet the sellers needs, the buyer offers to have their agent come over to talk about listing. The guys I know doing this see a very high rate of people choosing their brokerage based upon this warm handoff from buyer to agent. I actually prefer this, this is what I do with my agent partner.
One way we combine the 2 strategies is, I'll tell the seller, "If you list with my agent, I'll keep my offer valid for the next xx days, and if you decide to accept it, she will cancel the listing agreement". Since my offer pre-dates the listing agreement, there is really no issue anyway, but the sellers that are on the fence like to know they can come back to me for the cash offer. So we get similar results to the "guaranteed sale program" without really offering as such.
All that said, I think it's a creative way to market real estate services, and it can be a competitive advantage for those that employ the guaranteed sale strategy.
45 Replies
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes10y
There is nothing illegal about agreeing to buy real estate. Yes, this is an old advertising gimmick, most don't agree to sell low, but still list.
The ad says list it, if it doesn't sell, we buy it at our agreed price, no bait and switch there.
Net listing, no, you take title from the seller, then do with it what you like, sell or rent it. A net listing is agreeing to a lower price, selling it and keeping the overage agreed to without buying the property.
And, Carol Jones Realtors had this program in the Mid-west, the offered price isn't always a low ball offer or 80% of value. Many were purchased as rentals.
Where the rubber meets the road is when a listing agent guarantees a % of the listed price and if not sold, they buy it for that amount, like 90% of the listed price! Now, they need to be careful in selecting the properties to qualify for that, but nice homes in stable areas, decent stats, 90% of the time they will sell for more than 90% of asking price. It also means you don't over price the property. You have to know the market and season.
Another ploy is reducing commission over time, 3,2,1%, so long as it's a vacant house and you don't have sellers around trying to show it. That helps the owner in longer term holding costs, somewhat.
In a large brokerage office, they can probably tell you when the property will close, within a few days. In house, they can push a property out to hundreds of agents with at-a-boys, benefits, bonuses, all kinds of games can be played in house.
Heck, one broker here rents his moving van to his clients, pretty cheap I'll bet, is that a seller or Realtor concession, he's not been called out on it I don't think.
Ahhhh, the games people play..... :)
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes10y
Originally posted by @Jay Hinrichs:
@Adrien C. I think they are very high volume agents with big teams.
if you click on this link and then look at the team you will see this realtor has 10 or more agents underneath him.
Mark Ferguson in Denver has the same approach vis a vi team building..
in essence one broker is running a company within a company.. and the commissions are shared between the team members with money all funneled up to the top dog.
Very lucrative for the face of the team.. I am sure this is a million dollar a year to multi million a year income for the head guy Rain.
Teams can certainly generate big money. I operate as a single agent, but my office is loaded with people using the team model. There is one team in my office, they have 12 members, 8 of which are agents. Gross commissions $2.8 million. That team leader is making some serious bank. Another team of 3 $1.2 million gross commissions. These guys are making many multiples of what I make, and actually working considerably less. Maybe I should start a team.
District Invest Group545 Reviews - Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes10y
I've seen this exact same marketing here which leads me to think there is someone out there selling this "system," but I've also seen similar models with different guaranteed sales offers.
- Lender · Granite Bay, CA · Member since 2014 · 456 posts · 454 votes10y
@Jay Hinrichs Hi, I don't know of anything about that ad that would be illegal in CA. I didn't take the time to read all the fine print, but agreeing to buy a home at a set price is no different than making an offer, which is legal. I mean if I tell a seller I will pay $300K for their home, and then we list it for $350K, and it doesn't sell, I am just buying a home for a price that I already agreed to pay. To me it seems like just a clever way of law-balling your own seller, and hoping that someone buys it at the higher price and you earn a commission. I am guessing that the broker is only agreeing to buy at a really good price, should the home not sell? Again, I am sure there are things about this program that I do not know about.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes10y
Perfectly legal! Just make sure that whatever the promise is, you can deliver. I offer to list at "x" or buy at "y". I give good honest comps. Some sellers don't want to list. My last deal was an offer to list at $155K or buy at 120K. They took the 120K. Another agent had also suggested a listing price of $155K so they knew I was on the mark.
@Bill Gulley we have agents offering to pay for a free LOCAL move once the house sells. It costs the agent a little cash, but is a great way to market and say thank you to the client.Heard Craig Proctor recently at a local event. Got to give him credit for great marketing! He was #1 and got there by using his brain.
- 10yRonald PerichPro MemberInvestor · Granite City, IL · Member since 2014 · 658 posts · 301 votes
There's a group in St Louis (http://www.thewallnerteam.com/guaranteed-sold.php) that doesn't guarantee to buy it, but the agree to pay $3000 if the house doesn't sell within 30 days. This seems to be a more reasonable and fair approach for the seller, but I haven't thought about it all that much. What kind of issues might you see with this?
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes10y
@Ronald Perich the potential issue I see is listing it well under market. Anyone can list for 15% under market and then tell the seller what a genius they are for getting a quick sale. I don't know that there is much if any recourse for a homeowner in that situation.
- 10yJean BolgerPro MemberAurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
I think this used to be more common in Colorado. I remember seeing a lot of ads for it in the past. Right now you don't see people offering it because stuff sells so quickly anyway.
Our state has a RE commission approved contract that has to be used in these instances, the "Licensee Buy-Out Addendum To Contract To Buy And Sell Real Estate". Here's a link to it, if you want to take a look. - Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes10y
It is fairly common in Texas. I can see lots of potential problems but if the broker does exactly what he says he will do then it should not be a problem.
It is important to remember a few things. The guaranteed price is not always the list price and the broker still charges full commission if they buy it.
Here is how I have seen it work.
House does not get a buyer at the list price of $200,000.
Broker buys it with CASH because the state requires they have enough cash on to buy ALL the properties that have this guarantee.
The price paid was the $180,000 guaranteed price minus 6% commission.
So broker gets a house for $169,200 that had been listed for $200,000.
They then treat them like any other purchase. Flip, Fix n Flip, Fix n Hold, rent and let title season and cash out.
One thing to consider is any lack of trying to find a buyer can get the broker in a lawsuit. Because of that they often have a way for the owner to opt out and not have the broker buy the house.
- San Diego, CA · Member since 2015 · 136 posts · 62 votes10y
Originally posted by @Jay Hinrichs:
http://theriangroup.com/your-home-guaranteed-sold-in-29-days-or-we-buy-it/
In our market in Portland Oregon there is usually one mega agent running this scheme
and I know its kind of an old play ( at least to us old guys) But I am wondering if this is legal in your state.
Its like buying listings.. and or its very smart you either buy it wholesale or you get the listing.. he is expanding to CA..
Brokers Agents whats your thoughts and or maybe its something to copy.
I bet this agent spends at least 20 to 30k a month on Radio and other marketing.
This is what Craig Proctor teaches. ERA used to offer the same guarantee during the "good old days". He has a few outs but in hot markets it works.
- Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes10y
For a short period of time I was part of a partnership that did this while teaming with a builder as part of a move up program. We bought most of the houses subject to and then resold them subject to mostly to a group of Japanese investors. The program was moderately successful until FHA changed their rules on how they treat existing mortgages. If you are the Broker doing these type of deals, you better be in a hot appreciated market or you are going to get stuck with some clunkers!
You said you would be insulted with an 80% offer but everytime we go into a house and get a 6% listing they are already at 94%. And if closing costs are typically offered in your market you are even closer
@Account Closed
That is not true that a broker is required to have cash and pay cash. Been there and done different. The agreement with the seller could contain every purchase option that is available
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes10y
I have seen this before. I was never interested in guaranteeing to buy a home if it didn't sell during the listing due to the possible accusations of not properly performing our fiduciary responsibility to the seller. We do a somewhat similar thing with our marketing though. We use a lot of the I BUY HOUSE marketing in the rental neighborhoods.
Really simple stuff. In our direct mail letters we tell sellers that we are a property management company with a large portfolio in their neighborhood and we can either buy your house, manage your house or sell it to our investor base and manage it for them.
It is not that effective in the nicer suburbs. In my opinion a "classier" or more "traditional" marketing campaign works better in the nicer suburbs.
@Account Closed
Originally posted by @Jay Hinrichs:
http://theriangroup.com/your-home-guaranteed-sold-in-29-days-or-we-buy-it/
In our market in Portland Oregon there is usually one mega agent running this scheme
and I know its kind of an old play ( at least to us old guys) But I am wondering if this is legal in your state.
Its like buying listings.. and or its very smart you either buy it wholesale or you get the listing.. he is expanding to CA..
He may want to change his mind about expanding to California. Chris Heller "the Home Seller" works for Keller-Williams in San Diego and has been doing this for years.
Reportedly he closes a deal about every 3 days. The Wall Street Journal has described him as the top residential real estate agent in the United States.
As you may have guessed there is no mention in the ads about the relationship between the clients Sale Price and Chris Heller's Price if the listing doesn't sell. Heller has bought lots of houses, I don't know for sure but from the numbers he racks he must have 50 to 100 (perhaps more) houses in his inventory.
The houses aren't cheap as you might imagine, I would estimate $250K to $1-3 Million. I am sure his inventory is dynamic, selling some as he is buying others. The management and carrying costs of such an inventory must be a full time job for someone.
He has another angle, one that works for California and might work in Florida, New York, Texas, Oregon and Washington state. He goes after Asian and European clients through the Internet and foreign publications and seminars. California and Vancouver Canada are inundated with wealthy Chinese fleeing (or hedging their bet) by establishing residence in the United States and Canada. I have done some research on this and I believe if not for the foreign cash buyers, now at 27% of California residential sales, the top end of the Golden State's homes would suffer a stiff price decline.
Last I looked the Chinese are moving into Texas --- big time. They are typically all-cash buyers. Vancouver Canada is another favored destination. Here's an example. A common brick 4 bedroom house with a pool (yes in Vancouver) which would have been worth about $2-3 Million in that very hot market was bought by a just arrived Chinese man for over $4 Million ----- CASH. He wanted it now! - like yesterday.
The house was in a nice neighborhood and well maintained but there was nothing exceptional about it. Imagine a typical 4 bedroom brick house with a pool in a nice neighborhood in Texas that might sell for $150k to $250K.
California has had an indigenous Chinese population since the 1880 railroad boom, some even earlier from the 1849 Gold Rush. The state is known in their folklore from the 19th century as "Gold Mountain". That gives an edge that other states don't have. But it is far from an exclusive relationship. The newer arrivals are looking outside of California.
The political worries motivating the Chinese are also being felt by wealthy Europeans. Remember both the Chinese and Europeans have experienced the devastation of World War and violent Revolution just 1 lifetime ago. American stability, safety and high tech or professional education for their children are primary goals. Next is to start a business in the US with some of their "residual" cash.
The Guaranteed Sales Program is generally used to get the listing not necessarily to buy the house. Part of the program involves built in price reductions which, in a hot market will almost guarantee a sale if priced right.
- Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes10y
i have to say, if my house were facing foreclosure and I needed to sell in 29 days "or else"I would be very interested in a chance of a couple weeks of MLS market exposure with a guaranteed buyout. There are all kinds of reasons a person may want to sell quickly and the MLS exposure will ensure at least a chance of receiving market value...adjusted for quick sale whether listed low or at market with "make an offer" or however realtors signal that a quick sale is needed.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes10y
Originally posted by @Jean Bolger:
I think this used to be more common in Colorado. I remember seeing a lot of ads for it in the past. Right now you don't see people offering it because stuff sells so quickly anyway.
Our state has a RE commission approved contract that has to be used in these instances, the "Licensee Buy-Out Addendum To Contract To Buy And Sell Real Estate". Here's a link to it, if you want to take a look.I didn't see a link ...
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes10y
@Steve Babiak I put a link in the first post.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes10y
Sorry @Jay Hinrichs - my post was directed to
@Jean Bolger who stated that she posted a link to an addendum.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes10y
@Jay Hinrichs - congratulations on topping the 8000 post number - the BP membership hopefully feels the same as I do, that your sharing of years of experience is enlightening, educational, helpful and quite beneficial. BP has become better as a result.
- 10yJean BolgerPro MemberAurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
Hmmm, I thought I had linked... trying again (This is the Colorado Licensee Buy-out addendum)
https://drive.google.com/file/d/0B1QWwFfpPTbkMXZZQjZicnhQVlk/view?pref=2&pli=1hope that worked
thanks for letting me know, @Steve Babiak
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