Disclaimer: These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia.
Most agents ask their clients for a contribution to the marketing and promotional costs when selling their property. Only a handful of agencies still absorb the advertising expenditure and punt that the commission achieved upon the sale will cover the cost.
This trend towards Vendor Paid Marketing (VPA) has occurred partly due to fee deregulation in 1998 whereby the government Scale of Fees was abolished and agents’ fees began to be negotiated down. The rapid growth of more sophisticated methods of marketing is another reason. Ten years ago, agents would typically implement about six key marketing methods such as print advertising, standard company signage and window cards. Nowadays, agents implement a promotional campaign that includes around sixteen different activities.
The cost of advertising is high, especially for print media and there are genuine benefits for the seller to pay for the promotional campaign when selling their property.
Firstly, it provides the seller an element of control over the marketing campaign. The frequency of the advertising, the style of the campaign and its content are all influenced by those paying for it. It is more difficult for a seller to justify directing the agent for the content of the advertising if the agent is paying for it.
Secondly, it saves the seller money. Because agents are required by law to justify the precise costs of each and every marketing activity charged to the seller with a maximum agreed cost agreed at the time of listing, properties that are sold early in the campaign attract less advertising expense. In other words, agents can only charge their sellers what advertising expenses have actually been used and must provide a statement of those expenses to their clients. An agent who absorbs the advertising expenses entirely has to recoup these costs by charging a higher overall selling fee with any early sale saving not passed on to the seller.
Thirdly, vendors can be guaranteed a good campaign. Most agents offer marketing alternatives, some a “gold, silver or bronze” marketing package and sellers are able to tailor a marketing campaign to their budget and expectations and can be certain it will be implemented.
Of the sixteen marketing activities good agents undertake, not all of them will carry a fee (access to the agent’s buyers for example) and about four of them attract about 85% of the buyers so spending many thousands of dollars on marketing is usually unnecessary and wasteful. Agencies differ in their approach but investing about $2500 for a three month campaign ordinarily ensures efficient and substantial exposure to the market ensuring all buyers can be found.
by Hayden Groves
REIA Deputy President