WHY AGENTS DON’T “LOSE” ON ADVERTISING COSTS
by Neil Jenman
Reading time: 4.5 mins apx.
Why are Australian home sellers stung for thousands of dollars in advertising costs if their homes do not sell? There are 195 countries in the world and in all except Australia (and, to some extent NZ), agents cover the cost of advertising homes.
This article will show you why you should never pay advertising money in advance or until your home is sold and you are satisfied.
It’s common for sellers to fork out three or four thousand dollars and then, when their home does not sell, they lose that money.
On high-end properties, the damage is worse. A couple on the Gold Coast have been trying to sell for two years. In that time, four different agents have failed. All agents made big promises. Each agent demanded advertising money. The owners were told advertising was an “investment”. Now, they have lost over $30,000 in advertising expenses. Some “investment”.
So, what do agents say that forces sellers to pay advertising costs?
The agents say, “We don’t pay our vendors’ advertising bills.”
They will also say: “If we pay advertising and you do not sell, we have lost money.”
That’s nonsense.
Agents are making huge profits from a source that few ever reveal.
Here is what really happens.
When agents advertise homes, they always get enquiries. They get people at open-for-inspections. Indeed, many agents boast about how many “groups” of people inspected a home.
Here is a typical text sent by an agent to an owner. “Hi David, we just sold XYZ property on Saturday for a big price. We had 201 groups of people through with over 50 seriously hot buyers.”
Here are two points agents do not tell you.
Point One. LARGE NUMBERS OF BUYERS.
This agent has 251 potential buyers of which 50 are “seriously hot”. This is for one house. The question you need to ask is this: If you have 251 potential buyers, why are you asking me to pay for advertising money to find buyers?
Sure, agents have plenty of buyers “on their books”. But many agents cannot be bothered calling these buyers when a new home comes for sale. They just place advertisements on-line and expect buyers to contact them.
It is easier to take money from you, the home-seller, for expensive advertisements that promote the agent’s name, than to call hundreds of buyers.
Agents should follow up buyers. But why should they when you give them your money so they can advertise and attract the buyers already known to them?
Just test it yourself. Contact any agent and ask if they advise you if they get a type of home for sale. Most will say: “Oh, keep an eye on-line where we put all our homes for sale.”
Do not reward lazy agents. Do not pay agents to ‘find buyers’ already known to them.
Point Two: BUYERS ARE SELLERS.
Think about those words. Buyers are sellers.
The buyers who inspect your home slept in a home last night. Many times, they own that home. And they need to sell it to buy your home.
There are two reasons agents insist on advertising (and neither benefits sellers).
The first reason is to increase the agent’s profile. Free advertising for their business paid by duped sellers.
The second reason is that ads attract more sellers. Of those 251 groups and “hot buyers”, how many are also selling? Perhaps dozens.
So, here is what happens:
Agents take your money and promote themselves. They find other homes for sale and sign up those owners – and around goes the scam again; they get more advertising money PLUS, of course, tens of thousands of dollars in commission from selling homes of buyers attracted to your home.
Here is another point:
WHO OWNS THE LEADS?
Here’s a question for sellers to ask agents: “If you attract buyers to our home and some buyers have homes to sell, will you want to sell their homes?”
Of course, the agents will say yes.
Do the sums. If the average price in your area is a million dollars and the agents charge 2 percent commission, a million-dollar sale is a commission of $20,000.
So, if an agent only gets three sales by selling the homes of buyers who enquire about your home, their commission is $60,000.
Here is another question for a seller to ask an agent:
“If I pay the advertising and you get three sales from buyers whose homes you sell and the commission on those three sales is $60,000, do you keep the $60,000, or do you give it to me considering that I paid for the ads?”
Do you see what’s happening?
Buyers are being attracted and their homes are sold by agents. The agents often earn tens of thousands of dollars in commissions from these sales – sales you rarely know about.
And these sales are made by the agents who tell you: “If your home does not sell and we pay the advertising, we lose money.”
What they are not telling you is how much commission they earn on sales because of your ad.
They cannot have it both ways. If you, as the seller, pay for ads, you should own the leads and get the commission on sales from your ad.
Why should you, the seller, lose both ways?
The agents expect you to take all risk. If your home does not sell – often because the agents cannot get the enticing price they quoted you when they signed you up – you can lose thousands of dollars in advertising money.
Money that led to the agent pocketing huge commissions from sales that were directly caused by your advertisement.
So, please understand: The purpose of you paying for ads is not to sell your home (the agents have already got the buyers), it’s to find other homes for sale. Have a look at your on-line ad and you’ll often see agents asking a question of all those who enquire about your house. The question will be: Do you need an appraisal on your own home?
This is what agents are taught – use advertisements and open-for-inspections to find sellers.
One training video had the agent/trainer telling agents that a “mistake” many agents make is to “sell homes too quicky”. He told agents to run more open-inspections to “max” the number of sellers attracted to each home. The more sellers the more sales. The more sales the more commissions.
Yes, all at your expense. You are a lead machine for real estate agents. And you are paying for them to get more seller leads.
Please sellers, do not fall for the trap of paying advertising money if your home does not sell.
In countries all over the world agents cover advertising costs. Why should Australian consumers be so massively ripped off?
Remember, when selling, there are two factors to focus upon: The highest price and the lowest costs. That means not risking a loss of money if your home does not sell.
As Australia’s best real estate trainer, Michael Kies, explains: “It is unethical to expect sellers to pay advertising costs when agents profit.”
As Michael tells agents: “If you offer sellers risk-free selling, you’ll attract a lot more sellers and make a lot more sales.”
Agents’ sales increase when they increase benefits to clients. Offering sellers risk-free selling is the ethical way to do business. And, ultimately, it’s far more profitable. Plus, as Michael Kies also tells agents: “You’ll sleep better at night when you place the interests of sellers ahead of your own interests.”
**********************
FOOTNOTE: Agents, if you are interested in offering risk-free-selling to home sellers, please contact us on support@jenman.com.au or call us on 1800 800 18. We always have sellers who are looking for good ethical agents to look after them – not exploit them. If you are interested in taking great care of sellers, we would love to hear from you. Thank you.
*******************
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, 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 get the best deal possible in real estate. And, of course, if any agents are serious about taking care of consumers, we’ll help you too. Thank you.
December 8, 2020 @ 4:05 pm
Hi Neil and team,
You seem to suggest here, by inference, that it is however okay to pay for the advertising after the home sells. Correct me if I am wrong. I would have thought that paying for ads (leads) to generate sales should always be the agents’ responsibility. Otherwise the entire commission becomes gross profit. I know of no other business in which the fee is 100% profit. When we sold our home at Castle Hill a few years ago we used a Jenman agent. We were not charged a cent for advertising. So what are your thoughts/feelings about vendors paying for advertising after the sale?
Thanks for your response.
December 10, 2020 @ 9:10 am
100% Profit – to quote John McEnroe, You cannot be Serious! Shows you know nothing about running a real estate office. Office Lease, ongoing expenses, staff wages etc etc, last time I checked it cost $12,000.00 per month per sales person up to 6 sales people to run and manage a professional real estate office.
December 9, 2020 @ 6:33 am
Thanks for your article. What I want to know is why Australian Governments are not addressing this issue? After all aren’t they, (the Govt.), supposed to be using their legislation to protect the community.
February 9, 2021 @ 10:16 am
Dear Jenman group,
Thank you for putting out there the deception & despicable rorts the real estate industry has been foisting upon poor clients forever. We, your readers, appreciate your candid, clear explanations & candidacy of what we have been questioning for many decades (in my case). It is always a delight to read your helpful writings & hoping that the ridiculous imbalance is rectified eventually through regulation to help everyone. I am often saddened by friends decisions regarding agents rorts & several have been financially destroyed as a result of unscrupulous agents threats, bullying & fictional statements. My poor neighbours house was undersold by 1 million dollars! Most disappointing.
Thanks again for your superlative articles.
September 9, 2022 @ 3:18 pm
Thanks for the great advice