March 22nd 2010
Opinion by Neil Jenman.
It's probably real estate's biggest con. And it's affecting thousands of property sellers every month.
It's the advertising stitch-up and here's how it works.
You decide to sell your property and you call the agent. The agent tells you that you've got a fine home and it's likely to fetch a top price. All very plausible.
But then the agent starts to talk about the M word - "marketing". In effect, the agent is not talking about 'marketing', he's talking about 'advertising'. And you are about to be conned into coughing up several thousand dollars, most, if not all of which, will be totally wasted.
Now, let's get one thing straight. The pitch you are about to be given will be very polished. It will be full of powerful sales 'closing lines' all designed to get you to hand over fistfuls of money.
The agent will talk about a marketing 'campaign' and how important it is that your property be 'exposed' to a wide audience. The theory will go like this: the more you spend on advertising your home, the bigger the price you are likely to get for it. There's only one thing wrong with this theory - it's bunkum.
Consider this: A real estate agent has been in business for many years; that agent has got dozens of homes for sale; each month hundreds of buyers make enquiries to that agency. And yet, every time a seller talks about selling, the real estate agency wants hundreds, often thousands, of dollars to go and find buyers. Real estate agents are supposed to already have lists of buyers. Real estate agents are supposed to be in contact with many buyers who are looking for homes.
It's well known, behind-the-scenes in real estate, that the main purpose of advertising is not to promote the sellers' homes, it's to promote the real estate agents' offices - all at the expense of the sellers.
Today, with the aid of the Internet, advertising costs should have fallen. But no, thousands of agents still want to spend thousands of dollars (of your money) in newspapers. It makes no sense.
Why spend several thousand dollars on a newspaper advertisement which lasts for just one day when, for a few hundred dollars you can advertise on the Internet for months? What's amazing is not that agents are still collectively spending millions of dollars in newspapers, but that they are still conning the property sellers into paying for it. Wake up, sellers!
If you've got a property that's worth, say, around $2 million, the agent is going to be getting around $50,000 in commission when it sells. That's more than enough. Don't add to that cost by agreeing to fork out twenty or thirty thousand dollars in wasted advertising money. Here's a three word message for sellers - Don't Pay Anything! At least not until your property is sold and you are satisfied. And don't pay money for advertising.
Think about this: If advertising money really does find the buyer for your property, why do you also need the agent? And, worse, why should you also pay the agent another $50,000 in commission? If the advertising finds the buyer, then do your own advertising and get rid of the agent. The money spent on advertising is almost all completely wasted. And the agents know it. Again, behind-the-scenes, most of them are having a big laugh at the expense of the sellers.
So, sellers, when you are interviewing agents about the sale of your home tell them that you are not going to pay anything for advertising money. The agent can deduct any advertising costs from the massive commission payment they are going to receive when your property sells.
There are two main ways that buyers look for homes these days: first, the Internet and, second, the For Sale sign. Newspapers are old hat. Their cost cannot be justified when compared with the great value of the Internet. So if the agents want to advertise in the newspapers, let them spend their own money, not yours. Guess what'll happen if you ask the agents to spend their own money? It won't get spent. But your home will still be sold. And for just as good a price.
Trust me, advertising does not have to cost you thousands. You do not have to pay for advertising in advance of your sale. The amount of the commission should include the cost of the advertising.
So, remember, until your home is sold and you're satisfied with the price: DON'T PAY ANYTHING!
Footnote: If you need a hand speaking with an agent about the costs of an advertising or marketing campaign, feel welcome to call us for assistance at any time on 1800 1800 1800. We'll be more than happy to speak to an agent on your behalf.