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Vendor Funded Advertising

Don’t you find it odd that with real estate commissions as high as they are, most agencies still expect the vendor to pay for advertising up front? You’re not alone. In fact it wasn’t always this way, and in other countries is far from the norm.

Prior to the 1990s in New Zealand, the agency paid for advertising, as that was seen as their obligation, and what their commission covered. Granted, back then their were fewer media options, and promotion of your property might be confined to a signboard on the roadside, a photo in the office window, and a brief advert in the local paper.

Nowadays there are multiple colour print outlets, glossy brochures, website and social media channels, radio and Television. Clearly the cost has increased in an effort to ‘chase eyeballs’ and the agencies are reluctant to fully bear the cost.
Note I use the term advertising - not marketing. The former is implemented to promote your property - whereas marketing is what the agencies do to build their brand (often using your money).

In a modern sales process, the agent typically has a listing for 3 months and must achieve a sale within that window in order to get paid. Put yourself in the agent’s shoes for a moment.. if they spend say $2,000 on advertising and the property doesn’t sell - you as vendor could walk away and they are left with the bill.
In my view however, pushing the cost onto vendors demonstrates a lack of confidence on the part of the agent. They don’t want their ‘skin in the game’ as perhaps they don’t fully believe they can sell the property at the price level indicated within the listing period.

If the agent/agency had the courage of their convictions - they would back themselves, absorb the advertising cost, and demonstrate their sales skills. Sure - some won’t sell - but that’s the cost of doing business and will surely improve their judgement over time.

And if they don’t believe they can get the price? Then one of two things must be true:
  • a) the agent over appraised the property - so there is nobody else to blame, or

  • b) the vendor nominated a higher price - whereby the agent should either politely turn them away - or if accepting the job, then and only then, quite rightly ask the vendor to contribute up front.

I’m aware vendor paid adverting is common nowadays, and a lone vendor is unlikely to change policy at a company level.. but it’s worth thinking about. I firmly believe that if the agency covered the advertising spend - then more accurate appraisals would soon follow.
So ask the question “why should I pay up front?” Let them explain it to you, and remember - everything is negotiable. It’s my hope that the industry will start to change, as the public become better informed and demand a better return on the some $2B (yes billion) paid in commissions annually.

Take care,
Scott Morison, Registered Valuer