Why The “Guaranteed Offer” Is A Bad Idea – In ANY Market.

Everyone seems to be running to the Company or those “No headache” services because of the convenience. That is fine – they can do that – but, I have to ask, did you ever notice that the price of goods is always higher at the convenience stores than your local supermarket? You probably scoffed at paying $2 for that soda pop when you bought it, and then bought it anyway, and found that the local food store had a six pack for $4.  But you thought that that six-pack cost too much.  It’s called urgency marketing.   A convenience store is there for your convenience, and you stopped there because where you were going was urgent, and you could not stop at the larger food chain.

While many choose those guaranteed offers from other real estate companies and The Company, you should understand that they are going to charge you fees and low ball your home values on their offer.   They will offer approximately 10%-20% below market value on the home depending on the condition, location, inspections, work needed to be put into it.   So say if your home is worth $310,000 they will offer $248.000-$279,000.  Their motive is nothing but profit.  

But if you don’t want to compromise on their “Guaranteed” offer, then they are in the front door as a marketing tactic to sell your home for anywhere from 3% to 8% depending on your location.

Regardless of their advertisements, your guaranteed or The Company offer will also include the following four-line items that later, during escrow, will be subtracted from the price they offer you:

  • Company service charge
  • Real estate agent fees
  • Repair adjustments
  • Closing costs.

Company Service Charge

  • You will pay a “service charge” of approximately 7%-10%. (I have personally seen it as low as 7.2% and as high as 9.1%).  This is many companies’ explanation of the service fee from a recently received offer:

“When you sell to us, we take on the substantial costs and risks associated with selling a home – so you can enjoy a simple, certain sale on your timeline. This service charge covers the price of preparing the home for the market, holding costs (such as utilities and maintenance), and selling fees for the buyer’s agent and our partner brokers.”

Most Traditional real estate companies are much lower than that at 4%-6%.

Confused?  Here’s a breakdown of what that means in plain English:

A. “This service charge covers the price of preparing the home for the market…”

  • They are NOT referring to preparing the home for the transaction wherein they purchase your home. When you’re selling your home, it’s most likely as prepared for the market as you’re able and willing to make it. They are referring to the transaction wherein they SELL your home to a new buyer.  It is almost like you pay double.

B. “…holding costs (such as utilities and maintenance) …”

  • Again, they aren’t referring to the period of time wherein you’re selling your home to them, they are referring to the amount of time they will have to “hold” your home while marketing it and selling it to the next buyer.

C. “…selling fees for the buyer’s agent and our partner brokers.”

  • Once again, this DOES NOT refer to the commissions paid in the transaction wherein you sell your home to The Company. The fees referenced here are the commissions that will be paid to the listing and selling agents on the transaction where The Company sells your home to a new buyer weeks or months after you sold the home to them.

So, why would you agree to sell your home at a discount price AND pay ALL of the company’s costs of cleaning your home up, maintaining it (including lawn mowing), marketing it, and then pay the commissions for the transaction to sell it to a new buyer that you have absolutely nothing to do with or benefit form? If you are willing to pay for all of that, you’d just sell the traditional way, wouldn’t you?

Real Estate Agent Fees

  • If you sell your home to The Company, you will not pay any real estate agent fees, or commissions for the transaction wherein you sell your home to The Company. However, as explained in paragraph “C” above, you WILL pay those fees in advance for the transaction wherein The Company sells your home to a new buyer.

Repair Adjustments

  • When you received your offer from The Company this line will be blank. As with a traditional sale, once the purchase agreement is fully executed, a home inspection will be performed. And just as in a traditional sale, you can expect The Company to present a “Request for Repairs.” The difference, however, is that The Company will require you to complete ALL repairs ot they will cancel the contract.

Anyhow, in addition to their “service fee” here’s a breakdown of what they will require you to pay based on recent offers we’ve received. The Company will require you, the seller, to pay:

  • 50% of ALL escrow fees
  • Owner’s title insurance policy
  • All real property transfer tax

The question becomes, is a guaranteed offer from any of the online or local offices worth it?  That is up to you to determine.   Most if not all Real Estate Agents do the same work that you are asking these guaranteed offer companies are doing. They use local help to accomplish most of it, and they do it for far cheaper.

If I were to take a single line item out of one of the closing statements I have seen.   $6,000 to paint the inside of a house, $125 service fee for calling the painters and ensuring they were going to be on time.   Your local real estate broker $2,000-$3,000 on average to paint a house and no service fees.

Maybe I should start charging service fees like they do – it seems to be popular.

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