Goulburn Real Estate Blog

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May 03, 2019

Are you paying to market your property... or your agent?

By Andrew Trim
Author of Real Estate Dangers

The real estate industry has convinced itself and the marketplace that the more exposure a property gets during the sales process, the better the outcome.

While this may seem logical, it’s worth digging a bit deeper. For example, is there a level of exposure that does more damage than good? When marketing a property for sale, does it need expensive exposure? Paying for exposure through expensive advertising presents two dangers: the loss of any upfront monies paid and the real responsibility of an eventual lower selling price.

Scattergun exposure to thousands of non-buyers can devastate the eventual selling price. Simply put, every person who sees a property but doesn’t buy it further erodes the eventual selling price.

Maximising the sale price of a particular property needs smart, effective and targeted exposure only to buyers considering a property with its features and benefits.

In the early 2000s, the internet appeared in real estate, and with it came a second revolution in property advertising. What was once the dominion of print newspapers, with agents spending tens of thousands of owners’ dollars in big-city newspapers promoting themselves in a crowded marketplace, shifted to the internet.

In October 1999, Fairfax media took its first steps into online property advertising, establishing domain.com.au. In 2000, realestate.com.au – which was established in 1995 and floated in 1999 – was a small, struggling start-up. It was close to collapse until John McGrath, one of the founding board members, contacted acquaintance Lachlan Murdoch, and News Limited stepped in as a major backer.

These two dominant real estate websites have common ownership with some of the country’s biggest newspapers. News Corp is now the parent company of realestate.com.au, and Fairfax now owns 60 per cent of domain.com.au after it was spun and sold as a separate entity at the end of 2017.

As agencies and their sellers abandoned newspaper advertising and moved online, revenue began falling with no significant increase in online revenue. That led to the concept of an upgrade. For a price, a property can be upgraded to a larger premium advertisement with priority placement, which increases views and enquiries. These upgrades run into the thousands of dollars.

What are these increased views and enquiries sellers are now paying for?

They certainly aren’t as simple as one would think. On one website, ‘views’ include three criteria, one of which is simply scrolling past. An enquiry can entail one of seven different criteria, of which only one involves making a direct contact with the agent marketing the property. That’s a dubious definition of an enquiry, to say the least.

At the time of writing, one major real estate advertising website charged $3500 or more for 30 days to advertise a property on their top upgrade. Prices vary from suburb to suburb. A rule of thumb is the more affluent a suburb, the higher the cost of the upgrade. That’s an anomaly in itself, because generally the more affluent the suburb, the fewer properties for sale, so there’s less need for premium advertising.

To appear at the top of any search, the seller must purchase the most expensive upgrade. This is not particularly significant after a potential buyer establishes simple search criteria such as suburb, property type, bedrooms and price. Upgraded online property advertisements are a win for the agent – not for the seller paying for the advertisement. The benefit is not that they attract more views – a perceived benefit of the seller – but rather that they attract potential sellers – a benefit for the agent. Many property owners who are considering selling do online research, weighing up potential agents by checking out their online presence, especially advertisements on major websites. The upgraded advertisement, larger and at the top of the suburb search, looks impressive to the future seller, who makes contact, unaware that a current client of the agent paid for this advertising – just as they will pay to help find the next potential seller.

 

Are you interested in reading Real Estate Dangers by Andrew Trim? Contact us to receive your free copy. Email: mail@goulburnre.com.au or call 02 4822 8711