Issue 53 - Vendor Paid Advertising - July 2009

Why is it that a number of real estate agencies are not content with gaining commissions from the owners of properties that they sell, but also want sellers to pay, upfront, for advertising?
Whatever happened to the idea of paying for a service, after it had been given?
It seems that there is now yet another concerted effort from some agencies to push the idea that loads of seller-paid advertising is going to improve their chances of selling their property.
As one person said to me years ago – ‘It’s like going into a butchery and, upon asking for some lamb chops, the butcher asks for money in advance to go out and buy the animal!’.
I could understand it if an agency had only just started in business and had no buyers,but on one hand, agencies are saying they have lots of buyers and on the other they
are telling sellers that they need vendor funding to find buyers. From a property sellers’ point of view,it just doesn’t make sense.
It makes sense for the agencies, however. If an agency could get every seller to advertise their own property then clearly the agency would benefit doubly – not only would they have huge exposure but it wouldn’t actually cost them, anything! Brilliant!
Some years ago, the then President of the Real Estate Institute of New South Wales, speaking about vendor funding of advertisements, said ‘If only sellers knew what little chance they have of selling their house, from their advertisement.’ Figures suggest that, in Australia, on average, only 1 home sale in 60 can be attributed directly to a particular, vendor-funded advertisement. We doubt that figures for New Zealand would differ much from this.
It seems to me that paying agencies extra to do what they should be doing anyway, is simply a waste of money – your money.
But it runs deeper than that. I believe that because they are not funding that advertising themselves they are not as careful with spending it. This is the reason why there is so much real estate advertising these days; lots and lots of completely unnecessary advertising. If it was their own money, they would be a lot more careful.
As proof that large amounts of advertising are not necessary, I have only to mention our recent sales results. In April 2009, for example, we were first equal for sales in the Titirangi area, with 31% of the market – this with only a small team and relatively little advertising – none of it vendor funded.
I’ll say it again. Vendor-funded advertising is a waste of your money. There – I can’t say plainer than that.
If it was simply a waste of money, it wouldn’t be so bad, but it is our belief that properties can actually be over-promoted. Think about this:
You, or others, look in the newspaper for properties for sale. You notice the same property being advertised week after week after week. What do you think this does to the price that the owner will receive? Do you think, as I do, that potential purchasers of the property are going to think that there just may be something ‘wrong’ with the property? Or possibly that the owners are desperate?
By advertising a property in this way, we believe that the value in a property is damaged, to the owner’s detriment. If agencies were paying for their own advertising, they would tend to advertise less (probably a lot less) and at the same time, not make their sellers look desperate.
If we can do it, surely everyone else could do it too. We get very good results while still paying for advertising. How is it that others seem unable to at least match that?
So, now the question is: ‘Why do other agencies tell their sellers that in order to sell their property, those agencies need vendor-paid advertising?’ We have proven that it is not necessary. Could there be another motive behind their stance on this?
We believe there is. We believe that the REAL reason for requiring vendor-funding is to increase the value of their ‘Brand’. Today, brand is all-important.I think that real estate agencies, in common with most businesses, need a strong brand. I just don’t happen to believe that the sellers should pay extra to promote that brand.
If agencies want a strong brand, let them pay for it themselves.