An Inventive Realtor's "Money Back Guarantee"
Posted by Pat Kitano at 9/21/2006 10:08 PM 
Categories: Technology, New Business Models, Realty Realities, Real Estate Economics, Cool Web Tools
Categories: Technology, New Business Models, Realty Realities, Real Estate Economics, Cool Web Tools
Chris Iverson at Ventoux Homes in Palo Alto is an inventive Realtor with a compelling offer.
For Home Buyers - Buy a home with Ventoux and if you don't like it, Ventoux will buy it back for Cash.
For Home Sellers - List a home for sale with Ventoux and they commit to purchasing the home at a predetermined price if the home doesn't sell within 88 days.
Furthermore, Ventoux offers a 24 hour cancellation policy for the listing agreement, with the request for the reasons for cancellation so they can improve their service.
A quick unscientific google of "home seller (or buyer) guarantee" found many Realtors across the US offering the home seller $500 if not sold in 60 days, many of them also offering home buyer "no commission" sale if not satisfied with the home purchase within 6 months of escrow close. The Broker is not much on the hook beyond losing some commission or petty cash. So, it seems the Ventoux Guarantees are unique and more daring with their accompanying cash back offers.
I asked Chris about his hedging strategy should a Guarantee be exercised. He fully discloses the terms of the Buyer guarantee - the cash offer is for 95% of the home purchase price exercisable within one year of close of escrow. The home seller signs a contract with Ventoux to find a higher priced replacement home as the buyer. The 95% cash purchase contract put in place prequalifies the buyer for the replacement home. Ventoux is basically hedged with the 3% buyer commission on the replacement home and the 3% seller commission on the subsequent sale of the repurchased home, but exposed if the Guarantee is exercised in a falling market where Ventoux may not recoup in the sale of its newly purchased property. Thus, if the price dips below about 89% of the original purchase price (see simple worksheet below) Ventoux loses on a simple cash basis (yes, I know there are more closing costs, just an exercise).
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Ventoux Simple Cash Flow Statement - Home Buyer Guarantee Reckoning
ASSUMPTION - Original home purchased for $1,000,000
ASSUMPTION - Replacement home purchased for $1,050,000
1) Ventoux buys home for 95% of original purchase price $(950,000)
2) Ventoux 3% commission on replacement home purchase $31,500
3) Ventoux 3% commission on repurchased home sale $26,840 (based on $894,660 price)
Sales price required from Ventoux's repurchased home sale to "break even" on transaction $894,660
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The Home Seller Guarantee is more easily hedged by pre-negotiation of an upfront exercise price acceptable to Ventoux. Chris mentions the 24-hour cancellation policy is also quite attractive now that certain agents contract listing agreements for up to one year to make it worth their efforts in this buyer's market.
Technorati tags sales tactics ventoux homes realtor real estate marketing home buyer guarantee home seller guarantee
I'm not sure I like the guarantee. Buy the home back for 95% and commit to buying a more expensive home from the same agent? It seems more like a gimmick to get more commissions to me. As to the 24 hour cancellation. I don't want to continue working with a client who is disgruntled with my services. I would let them out of a contract in a heartbeat. It only increases bad PR to MAKE them stay listed when they are unhappy. Let them go and move on to the next one!
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Hi Bonnie... you taught me early on that although real estate blogs attract a national audience, the content reflects regional perspective. A money back guarantee may seem gimmicky in areas that are not considered potential housing bubble regions. But in California, particularly the Bay Area where prices have not really fallen, the home buyer and seller are bombarded with "crash" scenarios and the nervousness has kept buyers away. The money back guarantee is appropriate for the times.
Although it may be seen as gimmicky to Realtors who see how the money back guarantee can be hedged (that's why I was sure to disclose the terms), the reality is the guarantee will rarely be exercised under normal circumstances. Who would want to move out of their new house and start the process again? From the home buyers' perspective, the money back guarantee provides a hedge against the threat of a crashing market and that is a real value. Similarly, the home seller guarantee also assures a floor selling price that is one more value-add service that the listing agent can offer. These offers demonstrate good intention to the consumer and is frankly good marketing because it's unique and addresses the "price crash" issue that hangs over us Californians like Damocles Sword. I myself would take up the offer if I were choosing between two equally qualified Realtors to represent me on either side.
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I have seen a few sites with similar guarantees:
http://www.rickbrash.com/custompages_reports.php?key=b37121
http://www.calgaryluxuryhomesearch.com/guarantee.html
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I expected the guarantee would be out there... surprising that Calgary pioneers the concept!
You've got a fine blog I just started taking notice... I voted for your Squidoo on Real Estate Voices because I'm trying to figure out just how Squidoo lens drives traffic... But I still don't quite get it... your Ubertor Squidoo page basically has the Ubertor feed... Bloglines and other aggregators seem similar... I'm not a techie so maybe I'm missing some SEP detail... anyway thanks for commenting...
--pk
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also http://30-60-90.com - the guarantee of the sale of your home is set by how quickly you want to sell your home.
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Interesting... I'm looking forward to seeing Realty Concert's newest developments!
--pk
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Craig Proctor Newmarket Ontario ...google him he started the offer
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