Message-Id: <ghZk07X0BwyDNflkoe@transarc.com>
Date: Mon, 28 Mar 1994 11:04:23 -0500 (EST)
From: Bob_Sidebotham@transarc.com
To: Harry.Bovik@cs.cmu.edu
Subject: money back gaurantee?

I'm selling my house, and wondered if anyone had used the "Money Back
Guarantee" program or the "Home Warranty" program, both offered through
Howard Hanna Real Estate Services. 

The MBG program is, I gather, at the buyer's option, but only if the
seller signs up. It's free to the seller, but costs 1% of the selling
price to the buyer (who must be represented by HH Real Estate). I
managed to get a copy of the buyer's contract, and it is rather
daunting. In particular, you have to live in the house for 180 days.
Then you may elect to excercise this program. What that really means is
that you agree that HH will list the house on the market. If it doesn't
sell within the next 6 months (I'm not sure what happens if you wait a
year before excercising the option), then an insurance company, which
just happens to be owned by the same holding company that owns HH Real
Estate, will buy it back. If it sells for less than you paid, then you
will be given the difference. Closing costs are somehow minimized, but I
forget the details. Meanwhile the buyer must buy another house at at
least 75% of the cost of the original, and must use an HH Real Estate
for this transaction. The house must be purchased in Allegheny County or
any adjacent county. 

So it sounds to me as if the fine print makes this less than wonderfully
attractive to the buyer. For the seller, HH claims this will improve the
value, but I wonder, since every 1% up front has to come from somewhere.
Second, HH says this is a wonderful program because if the buyer
discovers something terribly wrong with the house, then they can just
get out, and the seller won't be subject to lawsuits. But I'm wondering
whether I wouldn't rather have a lawsuit from the original buyer than
from a company associated with HH Real Estate! 

The Home Warranty program looks a little better. It's purchased at
seller's expense (I think it's around $400 at closing), and protects the
seller somewhat during the listing period and the buyer for 13 months
thereafter. Everything is capped, with a $50 deductible, but it might
provide some "peace of mind" to the buyer, especially for a first time
buyer. It does mention that the buyer is not responsible for any
misrerepresentations by the seller, which makes one wonder whether the
insurance company will try to bill the seller later, if they believe the
problem may have been preexisting or had preexisting causes. 

Any opinions? 

Has anyone dealt with these programs, either as a buyer or a seller? 

Thanks, 
Bob