What Is Seller Buyback?

Cell phones are popular items for seller buyback.

A seller buyback agreement is a written agreement presented at the time of a purchase. It requires the seller to repurchase the merchandise under specific circumstances. The buyback agreement may require the consumer to trade the original product for a gift certificate that can only be spent with the retailer that offers the seller the buyback. In addition, seller buyback programs do not cover products lost or damaged by the consumer. This type of agreement is not a substitute for product warranties.

Terms

Buyback agreements can be for the full purchase price, a percentage of the purchase price or the original purchase price minus an allowance for depreciation or damage to the property. In some sales, in which a buyback agreement is in place, the original retail price reflects the cost to the retailer of the existing agreement upfront, or it is agreed that the consumer will pay a repurchase fee if the product is subsequently returned to the retailer after use.

Purpose

All states have a lemon law for motor vehicles that force the manufacturer or dealer to buyback vehicles deemed "lemons" under the pertinent state law. In such cases, the manufacturer is forced into a buyback of the product to protect the interests of the consumer. However, most often where a seller buyback agreement is in place, the feature is intended to entice consumers into purchases that otherwise might be delayed or passed altogether. The consumer electronics industry is one section of the economy where seller buyback agreements are more common.

Expert Opinions

According to the Texas Attorney General's office, buyback programs, popular in electronic gadget sales, act as an insurance policy against the loss of value a gadget may suffer when a newer version hits the market. The attorney general's notification goes on to clarify that often the true value of a product can be difficult to determine and that terms of buyback agreements issued by the seller tend to "favor the retailer." Although seller buyback programs may sound good and offer the consumer a convenient service, the additional costs do not generally offer a reasonable value for the money, according to "Consumer Reports."

Major Purchases

Seller buyback programs are not limited to small retail items. Programs are available on different types of purchases and products. For example, contracts to purchase a condominium or some large investment may contain a provision for a seller buyback. An optional buyback agreement as part of a condominium purchase may require the seller to buy back the unit at the buyer's discretion during a set time or under certain circumstances.

References

• Better Business Bureau: California Lemon Law Information
• Cal Poly Pomona Foundation: Home Buyback Option Agreement Addendum
• Texas Attorney General: Weekly AG Newspaper Columns
• UCSB Economics: Revenue Recognition
• Consumer Reports: Electronic Buyback Program Are They Worthwhile
• Better Business Bureau: Electronic Buy-Back Programs May Come With Drawbacks

Resources

• "Chicago Tribune"; Retail Buyback Programs Give Tech Gadgets a New Place to Go; Gus G. Sentementes; March 2011
• Federal Trade Commission Bureau of Consumer Protection: A Businessperson's Guide to Federal Warranty Law