“If your house doesn’t sell in 90 days, I’ll buy it from you!” You’ve probably seen those types of ads before. So what exactly is a Guaranteed Sale and how does it work?
In a guaranteed sale agreement, a REALTOR® agrees to pay a seller an amount of money for his/her real estate and is always done through the Brokerage.
Legally speaking, a guaranteed sales agreement is defined in section 20 of the Real Estate Act as:
“An agreement in writing under which an industry member or another person on behalf of or to the benefit of an industry member undertakes to pay to the seller of real estate within a fixed or determinable period of time and a fixed or determinable amount of money in respect of that seller’s real estate.”
When a brokerage or industry member acting on behalf of the brokerage enters into a Guaranteed Sale Agreement, no commission is payable.
Developers may also offer this incentive. For example, Anthem Properties, developer of the Waterfront highrise condo project in the downtown Eau Claire district, says it will buy the existing home of anyone who purchases a selected Waterfront residence.
Anthem’s Safe Purchase Program at Waterfront
How it Works:
1. Purchaser and ARL execute Contract of Purchase and Sale (CPS) for a suite at Waterfront. Rescission period of 10 days begins. Existing Home Option Addendum signed and non-refundable $500 fee from purchaser paid to ARL. The fee covers the appraisal and administration costs.
2. Within the 10 day rescission
a. Independent appraisal of the subject home, coordinated by ARL
b. ARL suggests purchase price of existing home
c. Purchaser agrees to the suggested price and initials the Existing Home Option Addendum, including Exhibit 2, an Addendum of Additional Terms and Conditions
3. With agreement on the Existing Home purchase price within the 10 day rescission period, the CPS, including Addendum, goes firm.
4. At the discretion of the purchaser, the CPS can go firm with only the Addendum cancelled. The addendum can be cancelled by the purchaser at any time, and is automatically cancelled when the purchaser sells their Existing Home to anyone other than ARL.
5. Approximately 8 months from Completion Date, the Purchaser is notified of the estimated completion date, and advised to list their home approximately 6 months out from Completion Date as per the Existing Home Option Addendum.
6. Minimum 6 months out from Completion Date, the Purchaser lists existing home per Addendum or defaults on the Existing Home Option. Purchaser to sign a listing agreement of no more than 4 months.
7. 60 Days prior to Completion Date, the Purchaser is notified they have 5 days in which to exercise the Option.
8. Option is exercised. (Or Addendum is voided)
9. ARL may commence marketing of the Existing Home (taking over from listing agent, or working with).
10. 10 Days from Completion Date, Statement of Adjustments and transfer per CPS.
11. Completion Date: transfer of funds for completion of Waterfront purchase and ARL purchase of Existing Home (concurrent exchange). If the Purchaser does not complete at Waterfront, the Existing Home Option is voided.
I asked a Sales Rep. the % of the appraised value they could expect:
“The price will have to be agreed upon by both parties and there isn’t a specific formula. It will be on a case by case basis and will rely heavily on the homes location. Our offer will most likely be around 90% of the appraised value.
This is a great program for anyone looking to purchase a home that has an existing home to sell and might be worried about the future of the Calgary market. Anthem is so confident that the market is going up that they are willing to put a guarantee on your client’s home selling. We basically take all of the risk.”
With new sales, you’re provided with a 10 day rescission period. Make sure you take that time – or before signing – to have your purchase contract and other forms reviewed and explained to you by your real estate lawyer.
Guaranteed Sales can provide peace of mind when purchasing a new home before you’ve sold your previous one. When it comes to dealing with real estate brokerages, you will not be charged a commission when they buy the property from you under a Guaranteed Sale agreement. Of course, what makes this worthwhile or not is at what price they’ve guaranteed purchasing the property at and under what conditions, if any.