Real Estate Advertising is one of the best examples of the incompetence and dishonesty in the real estate industry.

Homesellers are being duped into spending millions of dollars on unnecessary real estate advertising through a system known as Vendor Pays Advertising, (VPA).

Since the introduction of this system, real estate advertising has reached record levels. There is now approximately twenty times as much advertising being done, yet there is no noticeable increase in the number of sales being made. In fact, in most areas, the number of home sales is declining.

Agents have taken to advertising with great enthusiasm since sellers began to foot the bill.

Whatever you do, do not fall for the mistake of handing over thousands of dollars to an agent for advertising.

This chapter will tell you how to avoid one of the worst mistakes made by homesellers today.

The Golden Rule of Real Estate Advertising is: You do not need to spend huge amounts of money on advertising to sell your family home.

The Truth

There are three reasons agents advertise. The first is to promote themselves. The second is to impress each other. And the third is to influence homesellers.

Agents state that advertising attracts buyers. But at what cost and at whose cost?

The cost is enormous. And most of it is a total waste of money. The agents won’t tell you this, of course. But behind the scenes, they all know the real purpose of advertising, as evidenced by these words from the Real Estate Institute of New South Wales:

“Ads are not written to sell the advertised property. Only 6 percent of ads lead to the successful sale of the particular property (according to one source). Sellers might be alarmed to learn that the advertising they are paying for has a slim chance of selling their property.”

Promote Agents
The main reason for advertising is not to promote your home. It is to promote the agent.

The biggest part of all real estate advertisements is the name of the agency. Agents want to make themselves ‘look good’. They call this ‘profile’ which is a big word in real estate.

A statement from a course held by the Real Estate Institute of Victoria, says, “The more ads you have with your name on them, the more successful you will look.”

Impress Each Other
The ‘success’ of a real estate agency is commonly measured by the size, number and frequency of its advertisements, There are awards for agents with the most advertisements. Hundreds of faxes are sent from the head offices of networks urging salespeople in branch offices to do more advertising and beat the other networks, “We must raise our profile", is the constant message.

There are gala dinners with prizes for salespeople who have persuaded homesellers to pay the largest sums of money for advertisements.

In New South Wales, the Real Estate Institute has an annual dinner sponsored by The Sydney Morning Herald. In a glittering night of ceremony, a string of awards are presented to agents based on their "image" and "marketing campaigns". The prizes are trophies plus free advertising space to the agents.

One angry home owner who lost $7,000 on advertising her home, which failed to sell, asked this question: "Why do Real Estate Institutes have awards for advertising and not for client satisfaction?"

She could have been speaking for hundreds of sellers who lose thousands of dollars every week.

Attract Buyers?
Agents rarely advertise to attract buyers. The buyers are already in the area.

Think about it. What is the one thing all homebuyers do before they buy in an area? They come into the area. They choose the area and then they choose the home.

Take the advertisements away and the buyers won’t disappear. Homes would still be sold because buyers would do what they have always done – visit an area before they buy.

Granted, advertising brings some buyers to an area. But, again, the questions must be asked: At what cost and at whose cost?

Let Agents Pay

If the agents want to advertise, let them pay for it. "It’s too expensive", will be the reply.

The reason advertising is too expensive is because agents do too much of it. This is not the fault of homesellers. It is the fault of the agents. No homeseller should have to pay for mistakes made by incompetent agents.

Impress Homesellers
Agents often carry copies of their advertisements to impress you, in the hope that you will perceive them to be successful. "The perception is the reality", is a phrase often heard in real estate. But the perception is not the reality, The perception is the deception. Don’t let yourself be deceived by the ‘look’ of a real estate agent. You need to look behind the look. Be suspicious of any agent with a large number of advertisements, Just ask yourself: "Who is paying for these advertisements?" And make sure you don’t pay for them.

Behind the Scenes

One of the greatest scandals in real estate involves agents who take money from dozens of sellers in the same area for advertising which attracts the same buyers.

Seller A pays an agent $5,000 and Seller B pays the same agent $5,000. And so do Sellers C to Z! The same buyers then come to each property. But each homeseller pays.

Homesellers often pay thousands to an agent and get nothing in return because this money is paid regardless of whether their home sells or not and regardless of the price for which it sells.

The Multi-Million Dollar Spend
The biggest 25 agents - in terms of spending - who advertise in The Melbourne Age spend more than $20 million a year of homesellers’ money. This is almost a million dollars per agency - for just one newspaper.

This is in addition to what they spend in other suburban newspapers. The advertising cost per home could soon average $10,000 in some areas. All over Australia, sellers are being ripped-off with advertising expenses.

A World of Ego-Mania
One ‘high profile’ agent, in Melbourne, boasted during a lunch that he had been given $14,000 by a homeseller while he was aware of a definite buyer for her home.

What is particularly disturbing about this story is that this agent later became the President of the Real Estate Institute of Victoria, When asked about it, his reported response was, "Yes, sure I said that. But we all do it."

Protecting YourseIf from Advertising Rip-Offs
The only way to protect yourself from being ripped off with advertising expenses is: never pay any money to any agent until your home is sold.

If enquiries to protect consumers can be conducted into other industries, why is the real estate industry being ignored? Perhaps it is because most home-owners only become homesellers once every ten years - even longer. Collectively, they are losing thousands of dollars a day. But, individually, they are only losing thousands every ten years.

Many homesellers do not realise they are losing thousands. They do not know what goes on ‘behind the scenes’ at the lunch tables and in the real estate classrooms.

People who investigate corporate crime will confirm, "The worst cons of all are those where the victims do not realise they are being conned."

These ‘profile’ agents will argue that they are not doing anything illegal. However, being legal does not necessarily mean being ethical.

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© 2004 Deane's Real Estate