Is Vendor Paid Advertising in the Seller’s Best Interest?

I read an article in a real estate business magazine the other day where the author suggested that sellers should be paying more money to agents to market their properties.

Vendor Paid Advertising (VPA) has been around for a while but it is something I, as a practising real estate agent for the past 26 years have never embraced, and never will.

Effectively what has happened is that the financial risk of marketing a property has shifted from the agent to the seller.

The risk to the seller is that once the money has been paid up front to the agent for marketing, if the property dosen’t sell, the money is not reimbursed.

Paying money up front to an agent gives the agent licence to waste the money on over the top, ineffective marketing which doesn’t make the slightest difference to the end result.

If the agent is confident and competent in their ability to sell the property, there is no need to be charging the sellers up front for marketing.

Once the sale is made we get paid well enough to be able to carry the cost of marketing. If we don’t believe we can sell the property without charging the sellers up front, then we shouldn’t take the listing.

I also saw a video recently where a real estate agent was suggesting that agents who do NOT charge sellers for marketing their property, were not acting in the seller’s best interest.

I found this to be an interesting and different perspective on this rather vexed question of Vendor Paid Advertising. It is probably fair to say that a majority of real estate agents now charge sellers either up front or at settlement to market their property.

Various people have told me that they were charged anywhere from $500 up to $4300 by real estate agents for marketing. At the extreme I recently heard of a case where the seller had paid $9000 to the agent and the property still hasn’t sold.

The problem with paying up front for marketing is that if the property does not sell, then you, the seller lose your money. The agent cannot refund your money because it has all been wasted, sorry, spent on advertising.

Also, if you take the property off the market then you are presented with an account to cover the cost of marketing, assuming you haven’t already paid up front.

So why do agents still insist you pay up front?

If there is now no financial risk to the agent because the seller is paying for marketing (more often than not the marketing is all about the agent and not much to do with the property), then the agent is free to waste your money advertising in places which no longer work as far as selling the property is
concerned, such as newspapers.

I can’t remember the last time I sold a property where the buyer came from a newspaper advert. The main reason is because most buyers (approximately 90%) enquire having seen the property on the internet and another 6% to 7% enquire off a For Sale sign seen while driving around the area where they are looking to buy.

The internet is a very inexpensive and much more effective way to market most products these days but especially real estate. Therefore, I cannot see how NOT charging for marketing is not working in the sellers best interest.

Maybe I’m missing something?

I would be really interested in your thoughts or queries. Please feel free to comment here.

Also feel free to check out our Facebook Page.

Vendor Paid Advertising:

Charging for marketing upfront is quite unbelievable and is one of the reasons why Bernie and his team will always take care of our properties whether it be sale, manage or purchase.

Bridget Stonier-Gibson.

Venor Paid Advertising:

Very thought provoking article. Thank you and I think you are correct that the agent should still pay to keep them sharp as to what is still working. Thanks for a very good read.

Benji Leggate

Find us on Google+