by Neil Jenman
Reading Time: Apx 5 minutes
Real estate is full of myths and misinformation.
Unless things go wrong, myths can go undetected. Home sellers may never realise they have been over-charged or under-sold.
Once sold, sellers move on. Their home was sold; they got their money. Sure, the commission and the costs were high but that’s behind them now.
There’s one word on the board outside their home – SOLD. It doesn’t say ‘duped’ or ‘conned’.
But if their home doesn’t sell, if their costs start to hurt, that’s when sellers may ask questions they should have asked earlier.
Questions such as: What happens if we don’t sell?
Joe and Maria own a home in a beautiful street in a beautiful suburb. The median price in their area is close to $3 million.
Joe and Maria are nurses – the most trusted of all professions. Like most sellers, they are dealing with members of the least trusted profession – real estate agents.
Joe and Maria are now into their fourth year of trying to sell their home.
And on to their fourth real estate agent.
With marketing costs of $24,000; staging costs of $16,000 and repairs (suggested by agents) of around $18,000 – their total costs (so far) are nearing $60,000.
Plus, their home has been empty for two years – on the advice of agents – which has meant they’ve had loan and holding costs of around $135,000. Never mind what they could have earned in rent – at least another $100,000.
So far, it’s cost Joe and Maria nearly $200,000 to not sell their home.
But it gets worse when another factor is considered – the damage to their home’s value.
From starting at close to $3 million (the agents advertised a “guide” of $2.8 million) they are now close to $2 million (the agents are now advertising a “guide” of $2.1 million).
Australia is the only country where homeowners can place their homes for sale – and those homes fail to sell – and the owners lose thousands of dollars in advertising costs.
Advertising costs have exploded by around one hundred times in the past 20 years. Before the advent of VPA (Vendor Paid Advertising), agents bore the cost of advertising. It was built-in to their commission.
But once sellers began to be duped into paying advertising costs, well, of course, the advertising rates – and the amount of advertising – soared.
Most agents have a two-step plan for selling real estate.
Step one: Spend a massive amount of money marketing a home.
Step two: If the home doesn’t sell, massively reduce the price.
Repeat – and keep repeating – until sold.
The thousands of dollars that sellers lose in outrageous advertising costs pales compared to the damage to the value of their homes from excessive and prolonged advertising.
Go online and type in the address of Joe and Maria’s home. Wherever you look, there’s their home – three years’ worth of advertising with dates, prices and comments.
Almost every buyer will now ask: What’s wrong with it?
According to most agents (another myth): If a home fails to sell, there are only two reasons: the price or the marketing.
But what’s missing from this reasoning?
The agent, of course.
Incompetence on the part of agents is never considered by most agents.
But that’s exactly why many homes are not sold.
Most of today’s agents are too incompetent, too thoughtless, too greedy, too lazy and too egotistical to consider any method but massive advertising and massive price drops.
But massive advertising forces a home down in price.
Most agents don’t care. Regardless of the sale price, they still get a high commission.
Nothing should be more important to sellers than protecting their home’s value. But try finding an agent who’ll tell them how advertising can damage the value of their homes.
As for the major real estate websites, they have one major goal – to milk sellers for as much as possible. I sincerely believe they should be known as real estate dot con.
These websites and their acolyte agents spread one of the biggest myths in modern real estate – that “it’s essential to advertise a home on-line”.
That’s such nonsense. Give me five minutes with any home seller and I’ll show them how to save thousands of dollars, protect their home’s value and get a better selling price.
Here are 12 important points that sellers should know about today’s real estate marketing.
Truth 1. Never agree to pay for advertising costs – at least not until your home is sold and you are happy with the price and the service. It’s simple. Say no. Be strong.
Truth 2. The best homes are seldom advertised. Ask any decent buyers’ agent and they will soon confirm that the best homes are often NOT advertised.
Truth 3. The main purpose of real estate advertising is to promote agents not homes.
Truth 4. Agents use advertising as a “conditioning” tool. If a home doesn’t sell, agents push sellers to drop the price.
Truth 5. If advertising was the only way of finding a buyer, why use an agent, just advertise yourself, cut out the agent and save thousands of dollars in commission.
Truth 6. Upgraded advertising is a con. Sellers are told they need to pay thousands of dollars extra so that their advertisement can be at the top of search results. Every seller is told the same. How can everyone’s home be the first home seen?
Truth 7. Research shows that a standard advertisement is just as effective (or even more effective) than a premium advertisement. This is from inside information.
Truth 8. If you hire an agent, it will cost you many thousands of dollars to advertise on a major website. If you hire a private sale company (like ‘Property Now’), it will cost you hundreds of dollars (not thousands) to advertise on a major website. I’ll bet no agent ever told you that.
Truth 9. One of the biggest myths is this statement: “You can’t sell a secret”. But as any good negotiator knows: Secrets are treasured. The best-paying buyers pay a premium for homes that are not advertised.
Truth 10. All agents have buyers on their books. They don’t need to advertise every home. One network boasts that they have “two million potential buyers on their data base”. Yet they still ask sellers for money to advertise. As one of their directors told me last month about their claim about two million buyers, “That’s BS.” Charming.
Truth 11. Back when the cost of advertising was included in commission, there was a fraction of today’s money spent on advertising. Agents waste your money but not their money.
Truth 12. In many areas, commissions are now up around $50,000 per home. What sellers need to ask agents is this: “Is $50,000 (or whatever they are charging) not enough for you?”
There are many ways to find buyers for homes without spending thousands of dollars on a major website. At last count, I listed 13 methods to find buyers at no or low cost. Unlike agents, I’m always happy to share them with sellers.
Online advertising should be the last method in the search for buyers. Not the first method.
Why do agents automatically default to the most expensive method of finding buyers?
Three main reasons: First, it’s not their money. Second, they get free publicity and third, other ways require something that many agents don’t like – work.
If you’re selling a home, don’t get misled by advertising myths.
If an agent doesn’t know how to find buyers without charging you thousands of dollars for online advertising, find a better agent.
It’s better to spend two or three weeks searching for the best agent than to do what Joe and Maria have done – spend two or three years (and lose tens of thousands of dollars) with the wrong agents.
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IMPORTANT: Our new book: QUESTIONS EVERY SELLER MUST ASK, is essential reading for homeowners thinking of selling. At $34.95, it’s cheaper than online advertising. One of the 200+ questions (with detailed answers) is this:
QUESTION 143: “What are effective ways to advertise without paying outrageous costs?”
Available now at all good bookshops or online order.
Footnote: Joe and Maria are lovely people. They have now approached Jenman Support for help. Our first aim is to help them undo the damage from the digital footprint. Our second aim is to discover the real reason their home has not sold – especially as it’s in such a stunning location – and then design a plan to make sure it does get sold. Stay tuned.
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George Marsh says:
Presumably VPA was a natural “progression” once realestate.com and the Domain websites determined that sellers and agents could both be milked for fees. And “modern” training of agents emphasising corporate needs first and foremost simply turns up the dial.