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the listing

A house on Hillside Ave., in Toronto’s west end that has been sold, on May 18.Fred Lum/The Globe and Mail

As prices in the residential real estate market cool from recent all-time highs, homeowners looking to sell are increasingly turning for businesses that offer some sort of guarantee to buy a home. Perhaps the most ubiquitous offers are the flyers with ersatz handwriting that arrive in the mail suggesting “cash deals” with “no banks” to buy your home “as is.”

“The reason our flyers look they way they do is for the most part people read them,” said Luc Boiron, founder of Bliss Realty Inc., who has been mass mailing flyers in Ontario for years as a way to generate leads for his home renovation, rental and flipping business. The flyers are formulaic and read something like “Hi, my name is Luc and I am interested in buying properties in your area.” The tactic has been common in the United States for decades and is designed specifically not to look like a high-production-value real estate brokerage’s postcards. “If we did the glossy ones they’d assume it’s a realtor and not read it,” he said.

But while Mr. Boiron’s flyers say he wants to buy your home, he’s upfront about the fact that he’s only looking for deals that he can find at below-market prices. And for those home sellers who call him with a property that looks good, but may not be for him, he uses an approach called “wholesaling” where he can assign a purchase offer to another buyer before the deal closes, pocketing any profit as the middleman in the deal.

“There’s nothing illegal, but it’s certainly not being straightforward,” said Ben Rabidoux, of Edge Realty Analytics Ltd. He had a chance to review one of these “cash buyer” offers when his elderly aunt responded to one of the flyers. In his view the language in the deal she was presented with was less a “firm offer” and more something like a “call option” in stock trading that gives the buyer the right to buy an asset at a certain time or price.

The offer he reviewed gave the buyer 30 days to find a higher price, an absolute right to reassign the purchase to another party, and a “due diligence” clause that lets them drop the deal at any time with no penalty, and not lose a very low $1,000 deposit.

“You might get 100 people to call you back, and you might expect 20 per cent to sign up, and if you eventually can get 10 closed deals your typical [profit] might be $25,000. You risk nothing … there’s no work involved and the economics are enormous,” said Mr. Rabidoux. Mr. Boiron renovates some of the houses he finds with his flyers, and flips the rest to a network of contacts he has built up but he declined to comment on his company’s typical rate of return. He is aware of other cash buyer flyers mailed by companies that may not buy any homes for themselves and only broker deals.

While the tradeoff for the seller is fairly straightforward – no real estate fees, but also no work on their part – figuring out if you’re leaving too much value on the table can be trickier.

“I’ve gotten calls from clients many, many times who receive them. The cash offer can certainly be enticing, but there’s an associated cost: you’re generally getting less for the property,” said Kevin Crigger, president of the Toronto Real Estate Board. He will advise clients to get independent legal advice, but also often puts together a home valuation based on what he would do as an agent, which may include staging furniture and cosmetic renovations. But the calls still roll in about the flyers: “They are very prevalent, and whenever there’s any uncertainty in the market I find they are more prevalent.”

Mr. Boiron said many of those who sell to his company have a house that needs a lot of work, and may also have some sort of financial or other lifestyle challenge.

“They are more likely living in a situation they are embarrassed about,” he said, such as one seller whose home hadn’t had water for years, or others who are hoarders.

The idea of a guaranteed home sale is powerful enough to build different kinds of businesses on it. Anshul Ruparell, founder and CEO Properly, says his real estate company doesn’t send “cash buyer” flyers, but it does offer a “sale assurance” program that guarantees if the company’s registered realtors don’t sell it through normal channels, Properly will buy it at a price that’s slightly below current market. After about 20 months of operation in Ontario, and more recently in Vancouver, Mr. Ruparell said his clients find the guarantee works whether the market is rising or falling.

“In a seller’s market they are looking for convenience and being able to move really quickly, in a buyer’s market they are looking for the certainty of a sale,” he said. And despite having access to close to $100-million in capital to purchase homes: “We’ve never had to buy a home still to this day.

“In the event we do have to buy the home, if we resell for a price higher than the customer got … we give that profit all back. We don’t have any financial incentive to game things.”

Mr. Boiron knows that some people find his flyers irritating, not coincidentally in recent years he has taken his name off all such advertising.

“There’s a lot of hatred and anger,” directed toward investors buying homes he said. “People will call and swear and they can be quite rude. I don’t see anyone calling Pizza Pizza, yelling that they got a piece of mail from them.”

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