Dear Monty: Is a home ‘trade-in’ a good idea?
Reader question: We are thinking of downsizing and found a home at an open house. The agent offered that we could “trade in” our current house. They compared it to trading in the old car. What do you think of trade-ins for houses? Andy and Marcia P.
Monty’s answer: “Trade-in,” “guaranteed home sale,” “home buy-out” or similar names have been available for many years. There are major distinctions in the names, and some are more consumer-friendly than others. This type of offering seems to be more prevalent, or more often utilized in times of easy lending and robust markets. I am not aware of any trade organization that lists real estate companies that offer guaranteed sales programs, but many markets have a real estate company or two that offer such a program.
— A contingency that states the offer is subject to the owner acquiring the new home and a disclosure of any real estate commissions due.
There are a number of reasons tradein programs have not seen general acceptance in the real estate industry. Consumers are skeptical. Trade-in programs are more complex than a traditional sale/purchase. There is more risk to the broker and more training and oversight of the agents. Additionally, there are fewer lenders that offer a loan product to real estate companies tailored to the unique circumstances of a pure trade-in program. Finally, many real estate agents are resistant to the concept of guaranteed sales as they feel it compromises the agency relationship when the agent-turned-buyer ends up with the house. Their commissions are also at stake, which can be a deterrent to an agent.
Despite the skepticism, some brokers see a trade-in program as an additional service to their clients, a visible point of differentiation from competitors and a program to increase revenue. required.
When no purchase is required, it signals a promotional tool to acquire new listing inventory or personal investment. Because there is no other revenue with only one home, the “guaranteed price” is likely to be lower than a “trade-in” price. Stated another way, when the real estate company has assured revenue from a second home sale, there is more fee incentive for the real estate company that allows more potential for a higher trade-in price.
When you find a real estate company with a home trade-in program that looks and feels like the description in this article, you can:
— Prevent the possibility of owning two homes
— Determine a worst case scenario before you make a decision
— Lock in the purchase of the new home
— Eliminate the cost of moving twice
Like other major purchases, investigating a home trade-in program requires active due diligence. Consumers will often find themselves in circumstances where a home trade-in makes good sense.