Where Your Ad Money Goes!

Essential information for all home-sellers.

by Neil Jenman

READING TIME: 5.5 mins apx

On the surface, it all seems fair and reasonable. You need to sell your home. Your agent says you need to advertise so you can attract buyers. It costs money to advertise. As the advertising is all about you and your home, it seems fair that you pay for it.

Of course, if your home doesn’t sell, you lose the money you paid for advertising – all of it.

Thousands of sellers lose thousands of dollars when they don’t sell their homes. Even those who do sell are forced to pay thousands of dollars for needless advertising. Wasted dollars.

But it’s your house, your ads, so it’s your responsibility to pay, surely? If you don’t pay or reimburse the agent for your advertising costs on your house, the agent will put the dogs on you (take legal action).

Yes, it seems fair and reasonable. Your home, your ads, all to find buyers who pay you hundreds of thousands of dollars (maybe millions) for your home. Look at all that money you will get, what’s a few thousand dollars in advertising?

That’s the spin thousands of home sellers swallow. It’s the spin that causes most sellers to waste thousands of dollars on advertising which, contrary to the ‘agent spin’, is rarely for the benefit of home sellers. Advertising – especially when it’s paid by your dollars – is always for the benefit of agents.

Let me prove it to you.

Let’s start at the beginning and expose the agents’ spin.

The agents say you must pay for advertising to get “buyers for your home” (let’s ignore that agents already have – or should have – buyers on their books).

Okay, so, if you are paying money to attract enquiry for your home, to whom should that enquiry belong? Who “owns” the leads created by your money?

If you are paying for the leads, surely the leads belong to you?

But that doesn’t happen.

If you are tricked (and let’s face it, there’s no word better than “tricked” to describe what most agents do over advertising), into paying money for advertising on the basis that advertising is for your benefit, surely you are entitled to all benefits that come from your advertising money? Again, of course.

So, let’s say you paid ten thousand dollars to the agent to “advertise your home”. The agent arranges for ads to appear on-line. A time for inspections is set. Several people show up at the inspections and, also, enquire by email from on-line ads. Your ads paid with your money.

Almost the first question all agents ask people who enquire about your home is: “Do you have a home to sell?”

Most agents know that as many as 60 per cent of the people who enquire about homes for sale also have a home of their own to sell.

Let’s say, of ten enquiries that come for your home, three of those people (half the average) have a home to sell.

And, let’s say the agent (your agent to whom you gave thousands of dollars to attract buyers to your home), inspects the three homes of the people who were found from your advertising dollars. The agent ‘lists’ those three homes for sale. The average fee on each home is, say, twenty thousand dollars. Your agent pockets sixty thousand dollars in commission. Thanks to you and your money.

How much of that sixty thousand dollars – created from your advertising dollars – is given to you? None, of course.

Now, let’s say – and this happens often – you decide not to sell your home. The main reason you decide not to sell is because the agent quoted you a high price before you signed up and is now telling you that “the market is saying your home is worth a lot less”. You are furious. You realise you were tricked by being given a false high quote to entice you to sign up.

At the time the agent gave you that quote, you did not know it was false. You may have based your future on that quote. And now the agent is asking you to lower your price by one hundred (perhaps two hundred) thousand dollars. The numbers no longer work for you. At this low price, you cannot afford to sell.

So, you tell the agent that you are withdrawing your home from sale. Maybe you’ll sell later, but not now.

If you had paid the agent for advertising, you would now have lost all that money. But the agent, who persuaded you that the advertising was all for your benefit – and never once mentioned benefits for the agent – has just pocketed sixty thousand dollars directly from your advertising money. The agent has made a huge profit. You have made a huge loss.

To make a profit out of another person’s loss is unethical. In the real estate world, it’s massively dishonest because all agents know the major reason they want you to pay advertising money is not for the reasons they tell you.

Agents are not using your advertising money to attract buyers to your home. They are using your money to attract sellers to their offices. They are making a profit while exposing you to a high risk of loss if your home does not sell or, even if your home does sell, to needless expenses.

And, remember, the figures used in this example are conservative. Sometimes agents can find four or five extra homes to sell from the “marketing campaign” on one home.

So, how do you ‘spin’ this back at agents?

Let’s try this ‘mock’ example conversation between you and an agent asking you to spend thousands of dollars to advertise your home.

AGENT: “The marketing campaign for the sale of your home is going to cost you ten thousand dollars. That will attract lots of buyers for your home.”

YOU: “Okay, so what happens to the enquiry that my $10,000 generates?”

AGENT: “We show the buyers your home.”

YOU: “Okay, but let’s say that some of the people who look at my home also have a home of their own to sell, does that happen often?”

If the agent is truthful, you will get the following answer:

AGENT: “Yes, it happens all the time.”

If the agent is untruthful, you may get the following answer:

AGENT: “No, hardly ever happens.”

YOU: “Okay, if some of the people who come to look at my home also have homes to sell, then you would go and list those homes for sale, wouldn’t you?”

AGENT: “Yes.”

YOU: “If some of the people who came to look at my home didn’t like it, you’d show them your other homes, wouldn’t you?”

AGENT: “Yes.”

YOU: “So, let’s say you get a couple of houses for sale from my advertising dollars and you also get a couple of buyers who buy other houses, that could happen too, couldn’t it?”

AGENT: “Yes.”

YOU: “Even though you might make five or six sales, let’s say you get just one sale directly from my marketing campaign – and that one sale means you gets twenty thousand dollars in commission, how much of that twenty thousand dollars do you give to me.”

AGENT (feeling somewhat uncomfortable at this stage): None of it.

YOU: “So, let me see if I have got this right: You are asking us to pay you ten thousand dollars which you said is to attract buyers to our home, but if that money attracts business to your office – which we both know will happen – and you get just two commissions which is, say, forty thousand dollars from sales because of our advertising money, and then we decide for whatever reason not to sell, it will mean we have lost ten thousand dollars and you have made forty thousand dollars. In effect, you will have made a huge profit from our losses, right?”

AGENT (with nowhere to go): May say: “Well, I have never looked at it like that before.”

YOU: “Perhaps you should. You see, here is our point: We don’t mind paying money if we get ALL the financial rewards that come because of paying that money. So, if we “own” the leads that come to you, that would be fair. We could pay you ten thousand dollars and you can give us the financial rewards that flow from that ten thousand dollars. But that’s not going to happen, is it – because that’s not the way things work in real estate?”

AGENT (feeling slight relief): “No, it’s not.”

YOU: “Well, can you at least understand how we don’t want to pay for a marketing campaign that is one hundred per cent no-risk for you with huge potential financial returns for you and yet, we literally get nothing out of it? In fact, if we decide not to sell (in the unlikely event that you had given us a false high quote on our home), we’d be out of pocket by thousands of dollars while you would likely have made thousands of dollars? Can you understand why we feel so uncomfortable now that we know – and you have agreed – what really happens to the money that sellers give you in the mistaken belief that it’s to attract buyers for their home?”

AGENT: “Yes, I understand.” If the agent does not say this, get rid of the agent!

YOU: “Okay, well, we are serious sellers and we will be selling our home. But we have done our research and we are aware of what goes on in the real estate world. We do not mind paying fair fees once the sale is made and we are happy with the price and your service. But we are not going to pay a cent in advance for any reason because money paid for advertising has far more financial benefit for you than us. We want a risk-free sale and if you won’t give it to us, we will just find an agent who will place our interests ahead of their own interests.”

Be aware: When agents know that that you are a genuine seller and they are likely to get ten or twenty thousand dollars in commission to sell your home, the smart ones – and the ones who place your interests first – are not going to quibble over “advertising costs”. They will agree to your rule that you: PAY ONLY WHEN HAPPILY SOLD.

Of course, the agents who are not so smart (and there are plenty of these) will still carry on about the “importance of marketing” and how you “must pay” and if you don’t pay they won’t be able to get the best price and blah-blah-blah.

And yes, some agents are so incredibly stupid that if you don’t agree to pay their (yes, “their”) advertising costs, they will walk away. They will refuse to list your home.

Let them walk away! You don’t want stupid agents trying to sell your lovely home.

The first thing you need when selling your home is a good agent. The quality of your agent has a profound effect on the amount of money you get for your home and the expenses you pay.

Your aim is to get the highest price possible for your home at the lowest cost possible. Sure, a good agent deserves to be paid well, but good agents share the risk – after all, that’s what business is all about, taking risks.

If the agent can’t see that you are a genuine seller and you are willing to pay them a healthy commission after they have sold your home for a good price, then find another agent.

Please understand the most important point: It is your home; you, not the agent, set the conditions under which you employ an agent. The agent works for you. If they won’t start the relationship by doing what’s best for you, how do you think the relationship will end?

Now that you know what those advertising dollars really do, please stand up for yourself and make sure you only pay once your home is sold for the price you want, and you are happy with the service.

You pay when you are happy.

Isn’t that the way business is supposed to be?

Please contact Jenman Real Estate Support on 1800 1800 18 to get the highest price at the lowest cost possible.

******************

To comment on this article, please click here.

To contact us, please click here.

To follow Neil on Twitter, please click here.

To visit our Facebook page, please click here.

To read more Articles, please click here.

******************

PLEASE NOTE: Our focus is upon helping consumers. Abuse from agents on our web site or Facebook page will be deleted or ignored or well publicised – it depends on our mood.

But one thing will never vary: We will never stop doing what we love most – helping polite and honest consumers to get the best deal possible in real estate. And, of course, if any agents are serious about taking care of consumers, we’d love to help you too. Thank you.

******************