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February 2017

‘Inside Secrets’ Of Real Estate

by Peter Lees

Open homes, auctions and vendor paid advertising, are a great benefit to real estate agents but of very little benefit to home sellers and buyers. These add on’s are part of the up-selling technique, a little like the ‘do you want fries with that?” of the real estate industry.

Take for example, Vendor Paid Advertising. Vendor Paid Advertising is worth millions of dollars to the real estate industry. A look at the profit and loss statement of some real estate companies would show that ‘advertising’ appears as an income item not (as most consumers would believe) as an ‘expense’ item.

When I first started in real estate, the concept of an owner paying the cost of advertising and still paying a commission was to say the least, highly unusual. Industry trainers however, discovered that if you could convince a seller to go to auction and also convince them that open homes were somehow needed, that maybe you could make an argument that advertising was needed and then – who was to pay?

It is interesting to look back on those days. When agents were paying for newspaper advertising, ads were only a single column and photographs were rare. Now that sellers are paying, ads are HUGE. Do a larger percentage of these houses get sold? Of course not!

More and more sellers are waking up to the reality that newspaper advertising is unnecessary. I wonder if we will see many companies closing down that have become reliant on the income for selling advertising rather than their income for selling houses?

And who needs to advertise in the newspaper when 9 out of 10 buyers use the internet to search for a property to buy?*

Take this as a prediction: A home owner paying for advertising in the newspaper and also paying a commission will cease to be common practice in the very near future.



* Australian Property Report, Nielson Online, 2008