Guaranteed Sale
A Guaranteed Sale is an assurance provided by a real estate brokerage firm, promising to purchase a property if it does not sell within a specified period. This guarantee is a strategy to attract more sellers, providing them with the confidence that their property will sell, either to another buyer or to the brokerage firm itself.
Key Elements
- Brokerage Firm Commitment: The firm pledges to buy the property if it remains unsold after a certain duration.
- Listing Period: The timeframe during which the property must be sold before the guarantee kicks in.
- Pre-agreed Purchase Price: Often, the price is set at or below market value based on appraisal to incentivize a swift sale.
Examples
-
Sure Sale Realty:
- Implemented a guaranteed sale program during a slow market period.
- Sellers had to commit to a 120-day listing contract.
- The firm agreed to purchase the home at its appraised market value if it didn’t sell within the specified period.
-
FastTrack Realtors:
- Offered guaranteed sales to clients listing properties at a minimum price determined through an appraisal.
- Provided an assurance to buy properties after a 90-day window.
Frequently Asked Questions
Q: Is the guaranteed sale price usually the same as the market value? A: The guaranteed sale price is typically based on an appraisal and may be slightly below the market value to mitigate the brokerage firm’s risk.
Q: How does a guaranteed sale affect the listing price? A: A guaranteed sale often results in a listing price that is compelling enough to attract buyers but also aligns with the agreed-upon guaranteed price.
Q: What happens if the property sells near the end of the listing period? A: If the property sells before the end of the listing period, the guarantee is void, and the sale proceeds as typical without the brokerage firm’s intervention.
Q: Are there any additional fees for a guaranteed sale program? A: Some brokerage firms may charge an additional fee for the guaranteed sale service, but this varies by agency.
Q: Can a seller back out of the program before the listing period ends? A: This depends on the terms of the contract, but generally, backing out may invoke penalties or forfeit the guarantee.
Related Terms
- Listing Contract: A formal agreement between a property owner and a real estate broker authorizing the broker to offer the property for sale.
- Market Value: The estimated amount a property would fetch in the current market based on comparable sales and appraisals.
- Principal: In real estate, this term often refers to the property owner or seller.
- Appraisal: An expert evaluation of the property’s value, usually conducted by a licensed appraiser.
- Brokerage Firm: An entity that connects buyers and sellers of real estate, offering various services, including marketing, negotiations, and legal documentation.
Online Resources
- National Association of Realtors: www.nar.realtor
- Real Estate Brokers Association Services: www.rebsearch.com
- Appraisal Institute Online Resources: www.appraisalinstitute.org
References
- Jones, T. M., & Smith, L. A. (2018). Real Estate Brokerage and Finance. Academic Press.
- National Association of Realtors. (2020). Real Estate Sales and Listings Report.
- Federal Housing Finance Agency (FHFA). (2021). Property Valuation Guide.
Suggested Books for Further Studies
- “Mastering Real Estate Principles” by Gerald R. Cortesi
- “The Book on Managing Rental Properties” by Brandon Turner and Heather Turner
- “Your First Home: The Proven Path to Homeownership” by Gary Keller
Real Estate Basics: Guaranteed Sale Fundamentals Quiz
### What is a Guaranteed Sale in real estate?
- [ ] A service where the seller guarantees to buy another home after selling their first home.
- [x] A promise by a brokerage firm to buy the listed home if it doesn't sell within the agreed time.
- [ ] A contractual agreement where buyers are guaranteed the best price.
- [ ] An appraisal service that guarantees the property value.
> **Explanation:** A Guaranteed Sale is a promise made by a brokerage firm to purchase the listed home if it does not sell within the specified period. This ensures the seller that their property will be sold either way.
### What is usually a required component of a Guaranteed Sale?
- [ ] An inspection waiver.
- [ ] A home energy audit.
- [x] A pre-agreed purchase price often below market value.
- [ ] Legal counseling for the seller.
> **Explanation:** The Guaranteed Sale usually requires a pre-agreed purchase price, which is often set at or below market value determined through an appraisal to minimize the brokerage firm's risk.
### Generally, how long is the listing period in a Guaranteed Sale agreement?
- [ ] Only one week.
- [x] It varies, often between 60 to 120 days.
- [ ] 100 days fixed.
- [ ] 30 days only.
> **Explanation:** The listing period in a Guaranteed Sale agreement varies but often spans between 60 to 120 days, depending on the terms set by the brokerage firm.
### What is the primary benefit for sellers in a Guaranteed Sale program?
- [ ] Free valuation of their property.
- [x] Assurance that their property will sell either to an external buyer or to the brokerage firm.
- [ ] A higher guaranteed sale price.
- [ ] Both buyer and seller agent services bundle.
> **Explanation:** The primary benefit for sellers under a Guaranteed Sale program is the assurance that their property will sell, whether to an external buyer or the brokerage firm itself, thus providing additional peace of mind.
### Is additional fee commonly associated with Guaranteed Sale services?
- [x] Yes, some brokerage firms may charge an extra fee for offering Guaranteed Sale programs.
- [ ] Never, it's always included in the regular services.
- [ ] Only if the home is sold within the listing period.
- [ ] Only in exceptional economic conditions.
> **Explanation:** Some brokerage firms may charge an additional fee for offering Guaranteed Sale services, although this can vary from one firm to another.
### What does the pre-agreed sale price in a Guaranteed Sale typically ensure?
- [x] It mitigates the brokerage firm's risk by setting the price at or slightly below market value.
- [ ] It ensures the seller always gains profit.
- [ ] It provides a higher sale price than regular sales.
- [ ] It matches the highest offer received during the listing period.
> **Explanation:** The pre-agreed sale price in a Guaranteed Sale typically mitigates the brokerage firm's risk by ensuring the price is at or slightly below market value, based on an appraisal.
### Can a seller back out of a Guaranteed Sale program without penalties?
- [ ] Yes, anytime without any consequences.
- [ ] Yes, but only within 15 days.
- [x] It depends on the contract, but usually, there would be penalties involved.
- [ ] Yes, if no offers are made within the first month.
> **Explanation:** Usually, backing out of the Guaranteed Sale program would involve penalties, determined by the specific contract terms signed with the brokerage firm.
### What happens to a property under a Guaranteed Sale program if it sells during the listing period?
- [ ] The brokerage firm automatically buys it.
- [x] The regular sale proceeds, and the guarantee is void.
- [ ] The brokerage firm keeps a portion of the sale proceeds.
- [ ] It remains under the contract until confirmed by the brokerage firm.
> **Explanation:** If the property under a Guaranteed Sale program sells during the listing period, then the sale proceeds normally as any standard property sale, and the guarantee provided by the brokerage firm becomes void.
### What usually influences the listing price in a Guaranteed Sale arrangement?
- [ ] The brokerage firm's monthly sales quota.
- [ ] Personal appraisals by the seller.
- [x] The necessity to align with the pre-agreed guaranteed sale price.
- [ ] Potential buyers' feedback from an initial open house.
> **Explanation:** The listing price in a Guaranteed Sale arrangement is typically influenced by the need to align with the pre-agreed guaranteed sale price, often set to attract buyers quickly.
### What may a brokerage firm gain from offering a Guaranteed Sale program?
- [x] An increase in the inventory of listings and potential future sales.
- [ ] Higher appraisal fees from guaranteed properties.
- [ ] Reduced need for marketing services.
- [ ] Immediate sale of all properties listed.
> **Explanation:** Brokerage firms offering Guaranteed Sale programs can increase their inventory of listings and ensure that they have a steady stream of properties, thereby strengthening their market presence and potential future sales.
