The price of selling

VICKI HOLDER discusses why the costs of property ad campaigns aren't covered by the real estate agent's fee.

When you're paying a real estate agent to sell your property, why do they ask for even more money to pay for the advertising? It's a question that is asked less frequently these days, as more vendors come to terms with what's involved in marketing a home.

The advertising campaign is now a fact of life in the real estate world. Without it, vendors have little chance of being noticed among the crowds. While commission structures have changed little in the past 20 years, the amount of advertising necessary to sell a property has escalated.

Real estate agents still perform the same tasks. Yet the advertising campaign usually costs thousands of extra dollars, and this means that there's even more work involved as homes have to compete so much harder with all the other properties on the market.

There's no way that an agent can absorb the extra cost involved. In fact, if the property doesn't sell, they risk running at a loss.

Ross Foreman, of Bayleys, Mt Eden, likens the scenario to selling Coca Cola. "We have a good product, which we can help to sell," he says. But if the vendors want us to maximise the price, then they have to pay for the advertising. A good marketing agent is worth their weight in gold."

THE AGENT'S COMMISSION

The commission pays for the agent's time and effort. The commission charged by most agents starts with a $500 administration fee. They then charge from 3.85% to 4% on the first $250,000 to $500,000. The percentage reduces to 2% on the balance, and, because it's a service for selling your house, vendors also pay GST on the commission.

The work involves many things, including researching titles, consents and other sold property prices in your area, getting LIM reports, preparing sales documents, organising and running open homes and negotiation on the vendor's behalf. Vendors also pay for the professional advice and expertise given by the marketing agent.

ADVERTISING CAMPAIGN COSTS

The ad campaign is an additional price borne by the higher prices demanded by the marketplace overall.

Typically, a modest $4000 promotional campaign will pay for colour signage to be erected outside the property and placed in the agent's window, three weeks' worth of colour ads in the Herald, three weeks' worth of ads in the local property magazine, an internet listing, a colour flyer and additional press ads.

In order to construct the promotional campaign, the agent must view the property and take the photographs, or commission a professional to take quality press photographs. They must write, or commission somebody else to write, the text for all the advertising material and signage. After creating the promotional material, they must organise the production and placement of the advertisements. There's also a fair amount of co-ordination involved in getting things ready on time. The signage must be up and ready for the open homes, and advertising must meet publishing deadlines.

A good marketing agent knows where to place the ads and the best frequency of placement. They can also advise on the best way to achieve visual impact with the advertising material.

It's not just the pricey properties that benefit from a marketing expert. A $200,000 property still requires a quality photograph and well-written text. The agent must think about the message and maximise the money they are spending for their vendor by producing a quality message.