Let’s face it. Home buyout programs are a mixed bag. Make sure you do your homework on any home buyout program or offer.  Does “Not all homes qualify”, or “Certain terms and conditions apply” cause a little concern?  What about “normal closing costs and commissions”?  The fact is most buyout programs are simply marketing hype designed to generate additional listings and business for brokers.  They are often not in your best interest, and will only erode your equity position in your home.  Not surprisingly, if you don’t have equity in your home you probably don’t qualify for a buyout. What a surprise!

The home buyout sales pitch usually goes something like this…

We will sell your home in 90 days (or 120 days etc.) or we will buy your home for cash!  We will guarantee a sales price and closing date that is acceptable to you.  You can have an insurance policy in case you want to move up to your new dream home and your existing home doesn’t sell.  You can benefit from any profit from the sale and we will absorb the loss.  There is no cost or obligation if your home doesn’t sell.

There’s No Such Thing As a Free Lunch – That Applies To Home Buyouts Too

That dream home you had in mind could quickly become an expensive nightmare. Some brokers will tout that they will sell your home for top dollar, but when the house doesn’t sell quickly, you guessed it …Price Reduction!   If you are building a new home and selling your existing home, there is a proper way to do it and receive market value for you home in the process.  Don’t let fear or aggressive sales tactics push you into a bad agreement.  Keep these important points in mind:

  • If you are building a new home, you shouldn’t be paying “normal” sales commissions on the sale of your existing home.
  • If you are going to sell your home for a percentage of “market value” (anything less than 100%) it will sell anyway.  A buyout won’t be necessary.
  • A broker’s opinion of “market value” may be artificially low if there is an agreement for a buyout.  There is an obvious conflict of interest involved when the broker has to buy you out, so the determination of “market value” should actually come from a disinterested third party.

Be Sure to Read The Fine Print

Remember the old saying that if it sounds too good to be true it probably is?  You would be well-served to read the fine print on any buyout program or guaranteed home sale being offered by a Realtor. Look at all written agreements carefully before signing.   The fine print may contain plenty of specific conditions and other very ambiguous terms for meeting performance.  Can you spell loopholes?

The term “value” will be tossed around like a bouncing ball.  There may also be transaction fees which are obscured.  You should also be aware of the consequences of dual agency if the Realtor or broker purports to represent you for both a sale and purchase.  All fees, commissions and bonuses should be fully disclosed in writing.

There Are Plenty of Investors Ready To Steal Your Home

Remember that if you want to give away your home, and any equity that you may have, there are plenty of investors willing to take your property off your hands.  Investors don’t make money buying homes at market value.  They buy distressed properties or properties with distressed owners.

The only way to really receive fair market value for your home is to sell it in an arms-length transaction.  That means you have a willing seller and a capable buyer agreeing to a sale on normal terms.  It also means you probably have a good Realtor who is marketing your home to all qualified buyers and keeping you informed of changing market conditions to maximize your chances of a successful sale.

If you see a Realtor offering up a guarantee of a successful home sale, proceed with caution!