Guaranteed home sales: A profitable gimmick for many top producers

Real estate agent CC Underwood touts a head-turning offer to homesellers.

“I know that when you need to sell a home, you need to do it sooner, not later,” the Realtor says in her TV spot, leaning confidently against a “sold” sign. “That’s why I guarantee I’ll sell your home in 60 days — or I’ll sell it for free.”

She’s one of many agents across the country who rakes in leads by guaranteeing to sell homes.

The business practice generates a great deal of clients for some agents. But it also often lives up to its reputation as a gimmick, an investigation by Inman has found.

Sellers attracted to agents by home-sale guarantees, in general, rarely take agents up on the offers after reading the fine print.

Be that as it may, many top-producing agents and teams are tapping online marketing and media personalities to advertise guaranteed-sale offers far and wide, as homes continue to sell at a fast clip in many markets.

Some critics label the practice a bait-and-switch, but proponents argue that home-sale guarantees serve to connect consumers with highly capable agents and do appeal to at least some sellers.

Indeed, the terms and conditions of home-sale guarantees can vary widely, with some ultimately proving more practical than others.

How home sale guarantees work

The most basic type of home-sale guarantee involves offering a seller the option to sign a listing contract with a shorter duration than normal — say, 60 days instead of 180. The seller can “fire” the agent — not renew the listing contract with the agent — if the agent doesn’t deliver on the guarantee.

Other types of guarantees raise the stakes. In one version, agents promise to sell a listing for free or a reduced fee if they don’t sell the property within a specified timeframe. In another, agents promise to buy a listing if they don’t deliver.

At least seven of the top 20 agent teams that made REAL Trend’s 2015 rankings of teams by transaction sides put some spin on one of these two types of home-sale guarantees.

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Guaranteed-sale offers often hinge on a seller agreeing to list a property at the agent’s recommended price, cut that price every few weeks if the home idles, spruce up the property and make the home widely available for showings.

‘I have not yet had to sell a house for free’

Underwood, owner of Jacksonville, Florida-based The Sellin’ With CC Team, has made a name for herself by promising to sell a home for free if she doesn’t get an offer within 60 days.

She said advertising her home sale guarantee reeled in 26 of her 61 listings this year — though none of those clients actually took her up on the offer.

TV commercial advertising CC Underwood’s home sale guarantee. 

For sellers to qualify, they must agree to list their homes at fair-market value as determined by Underwood, whose team works at Keller Williams Jacksonville Realty. Luxury and vacant land listings aren’t eligible for the program.

Sellers must also agree “to reduce price if 10 showings and no offer or 3 weeks without 10 showings, to be predetermined.”

Staging and painting a home and making necessary improvements, should they be requested by Underwood, are also part of the deal. If sellers fail to execute on any of these terms, the guarantee is void.

“They essentially do what I tell them to do to get their home in ready showing condition so that I’m in control of the marketing. I know it’s a product I can sell in 60 days,” she said.

“If I’m not satisfied and you don’t deliver, then I have zero risk.”

Since Underwood began pitching the guarantee on TV and radio three years ago, she estimates that only 1 in 10 of the clients who hired her after seeing the ad actually opted for her guaranteed-sale agreement. So far this year, none of the 26 clients generated by the offer have taken her up on it.

The few times that customers have signed her agreement, Underwood has always delivered on her guarantee, she said. “I have not yet had to a sell a house for free.”

Criticism

The Sellin’ With CC Team’s ‘Guaranteed Sold Program’ agreement

Critics say home sale guarantees like Underwood’s often mislead consumers and reinforce negative stereotypes of agents.

“I believe the message does what it’s supposed to,” Underwood said in an email, when asked why so few clients end up opting for her home-sale guarantee. “Sparks interest, the potential seller feels confidence so they get excited and make the call or go to the website.”

The home-sale guarantee typically doesn’t come up in appointments generated by the guarantee, and if it does, sellers may find the offer’s terms and conditions unacceptable or tell her they don’t care about the offer, according to Underwood.

“They feel I’m someone who is going to get the job done because I’m doing something different,” she said.

Buy-out offers

Some real estate agents take things a step further than Underwood, offering to buy a home if they can’t quickly offload it.

“It generates boatloads of leads,” said agent Linden Moe about his offer to buy a home if he doesn’t sell it within 59 days. “They just don’t want to take us up on it.”

Moe leads NJ Top Ten Realty, a Jersey City, New Jersey-based agent team at America’s Elite Real Estate. He said his six-agent team has closed 125 transactions so far this year.

Moe’s guaranteed buy-out offer, which he credits with having hatched about 20 percent of his sales this year, works like this:

Sellers agree to list a home at 95 percent of market value and cut that price by 10 percent twice before the 59 days elapses.

Should the home still not sell, the seller receives an offer from Moe for the twice-reduced list price minus both a typical commission on the listing’s original price and minus repair costs. That can work out to an offer that’s around 70 percent of Moe’s original valuation.

Marketing ecosystem

Home-sale guarantees are so effective for agents that an entire marketing ecosystem has sprung up around them. Agents often promote their guaranteed-sale offers through endorsements from TV and radio personalities, such as Barbara Corcoran and Glenn Beck.

Barbara Corcoran’s video endorsement of Mark Spain, the leader of a top-producing agent team at Keller Williams Atlanta Realty, touts the team’s home sale guarantee. 

A large share of Barbara Corcoran’s “favorite brokers,” a network of dozens of agents who are endorsed by the hard-nosed real estate mogul and “Shark Tank” star, appear to offer home-sale guarantees.

At least one seller lead-generation website caters to agents who offer home-sale guarantees. Agents can pay $500 a month to receive the contact information of prospective sellers who request home valuations on guaranteedsale.com.

They can also budget marketing dollars to the website, which will use the money to promote their guarantee through online marketing channels like Facebook.

Morgan Carey, CEO of real estate website provider Real Estate Webmasters, said his firm recently bought guaranteedsale.com because he noticed that many of the country’s top-producing agents and teams make guaranteed sale offers.

Among these is the CEO of Keller Williams Realty, Chris Heller. His team offers “Your Home SOLD Guaranteed…or We’ll buy it” on askhellerthehomeseller.com, complete with a video endorsement from Barbara Corcoran.

Underwood, also a Keller Williams Realty agent, rolled out a home sale guarantee three years ago because, when it came to radio advertising, “that was the one thing that was consistent that all the top producers were using,” she said.

Bait and switch? 

Critics of home sale guarantees say the fact that the offers are effective is beside the point. The sales strategy is a bait-and-switch and gives a bad name to the industry, they argue.

Agents rarely reveal any terms and conditions when advertising the offer, and sellers who respond to it often discover that they don’t qualify or that the terms and conditions are unacceptable, they point out.

“The guy I worked for always thought I was sharing too much,” said agent Darren Burke, speaking about a former manager’s criticism of how Burke used to pitch the manager’s guaranteed-home sale offer to prospects. “What he wanted me to do was use the program as a hook to get the business, but not necessarily go any further.”

The small minority of sellers who do opt for guaranteed-sale offers, critics say, can end up with a raw deal. They may be misled about the value of their home or inadvertently disqualify themselves by, say, arriving late to a showing. Some might end up selling their homes for an unreasonable discount.

Burke, now an agent at Mentor, Ohio-based Keller Williams Cleveland Northeast, said he stopped working for an agent who offered a home-sale guarantee because the practice “didn’t match my spiritual beliefs” of “transparency and integrity.”

While plenty of agents offer a home-sale guarantee in an ethical manner, “when you provide a lack of information,” you’re veering into a moral gray area, he said.

If the top producers are doing it…

Others downplay criticism of home sale guarantees, arguing that they’re just like many other marketing tactics: designed to lure business, not bore consumers with legal language.

Some agents claim they are providing a valuable option to a real segment of homeowners: sellers who are more than willing to risk selling their property for less than full-market value if it means they can move on with their lives.

“In the wrong hands, it can probably be abused,” Carey said. But many top producers who offer home sale guarantees wouldn’t be successful if they didn’t use the marketing strategy in a responsible manner, he claims.

A home sale guarantee that doesn’t underwhelm

Not all home-sale guarantees end up underwhelming the consumers who respond to them.

Since Daniel LeClaire launched a guaranteed-sale listing option three months ago, all three sellers who have learned about the offer have taken him up on it, he said.

LeClaire guarantees sellers that their listings will actually go under contract, not just receive an offer.

If a listing doesn’t go under contract after 30 days, he’ll cut his commission to 2 percent, and if it’s still sitting on the market after 60 days, he’ll lower it to 1 percent.

Part of the reason why LeClaire is three for three in delivering on his guarantee is that sellers who opt for the offer must agree not to “test” the market.

Sellers can’t factor in the prices of active listings when pricing their home. They must base the price of their listing solely on the sale prices of recently sold homes.

“I haven’t been wrong, and I don’t want to wrong,” LeClaire said. “I don’t want to take money from someone and they listened to everything I told them to do.”

Some agents make a guaranteed-sale offer contingent on the seller also using them to buy a home. Those agents may even require the seller to buy one of their own listings to qualify for the offer.

In one of the sales tactic’s most lucrative use cases, agents will partner with homebuilders to advertise a home-sale guarantee to prospective buyers who may be more inclined to commit to buying a not-yet-built home if they can count on selling their current one in the future.

An agent could represent the homeowner as a seller, the homeowner as a buyer and the builder as a seller, collecting perhaps a six percent commission from the builder and a 3 percent commission from the homeowner.

Home sale guarantees can be a “huge, huge marketing tool,” said Tim Harris, a real estate coach.

But agents should only make the offer if they receive approval from their broker, who can be liable if agents don’t make good on a home sale guarantee. “And you should definitely also have an attorney review it,” he added.

Email Teke Wiggin.