It's ancient for agents to ask vendors to spend thousands on print advertising: Terry Ryder

Hearty congratulations to Melbourne real estate agency PhilipWebb for deciding to stop advertising client properties in newspapers. The agency has generated publicity for deciding that newspaper print advertising is “Jurassic” in nature and that online promotion is the only way to go. It had abandoned metropolitian dailies, but stuck with regional press ads until recently.

Late is better than never, but what took you so long to have this blinding flash of the bleeding obvious?

Enlightened agencies came to this conclusion a decade ago. Jenman-approved agencies have been finding buyers for homes without newspaper advertising for at least the past 10 years.  

I have published four books on the real estate industry, the first of them in 1998, and they have all warned sellers to avoid agency pressure to spend thousands on unnecessary newspaper advertising.  

Here’s what I wrote in Property Smart in 2002: “One of the unsung scandals of real estate is the many different ways agents abuse their clients’ advertising money … Agents use this money to further their own ends rather than their clients’.  

“Agents use their clients’ marketing budget to promote themselves … Often the largest words in a real estate ad describe the agency name. One way of another the agency’s name will be prominent when in reality there’s no need for it to appear at all.”  

Evidently PhilipWebb agrees. It told Property Observer last week that print advertising was just a way for agents to get their brand noticed – at the expense of their clients.  

Property Smart also described how agencies have earned commissions or rebates from newspapers for directing their clients’ ads to those newspapers. This still happens today and is one of the great outrages in real estate. Why should agencies receive financial rewards for spending their clients’ money? If anyone should receive a reward, it should be the home seller who pays for the advertisements.  

Currently there is a court case in Victoria over an agent allegedly receiving secret commissions from a newspaper for directing vendor-paid advertising their way. The case is ongoing.

What is surprising is that there are not more such cases. Newspaper kickbacks to agencies for vendor-paid advertising have been standard in real estate for decades.

What is even more surprising is that Saturday’s newspapers are still crammed with real estate ads. This is worse than “Jurassic” – it’s a terrible waste of money by the home sellers.

Home sellers appoint real estate agents to sell their properties and pay them with a handsome commission if they’re successful. It’s scandalous for agents to ask their clients to also spend thousands on advertising. 

As consumer advocate Neil Jenman says: if the ads sell the property, why do you need an agent? Just place the ads yourself and save yourself the agents’ selling commission.

The bottom line is that no advertising should be necessary at all. Agencies are supposed to have buyers available.  

But if sellers feel that advertising is necessary to assist the sales process, the last place they should put it is in a newspaper.  

Online marketing is far more effective and less costly. It’s so much more-user friendly than the great mass of newspaper advertisements, grouped under agency banners and designed primarily to promote the agency – at their clients’ expense.

How does a Melbourne buyer interested in a four-bedroom house in, say, Brighton, find such properties amid the great jumbled mass of property ads in a newspaper? It's nigh on impossible.  

Compare the ease with which you can isolate properties that meet your location, type and price criteria in an online service.  

If you’re selling your home and your agent tells you that you need to budget thousands for newspaper advertising, you have appointed the wrong agent. Sack them and find an alternative that has buyers looking for property in your area and therefore doesn’t need to waste your money on advertising.  

Why blow a big chunk of your capital gain on a wasteful agent?

Terry Ryder is the founder of hotspotting.com.au