Expensive web advertising drives off market transactions.



Real estate agents across the country are increasingly moving toward off market transactions. An off market transaction is defined as one where the agent only markets the property to their database and known buyers rather than listing on prominent media websites.


Given the sophistication of industry Customer Relationship Managers (CRMs), it is plausible that an estate agent can expose a property to the vast majority of active buyers in the market. But these CRMs have existed for quite some time. Whilst they facilitate the effectiveness in off market sales, they are not the cause of the recent spike in transactions.


Off market transactions have spiked because agents and consumers are looking to avoid the high cost of real estate websites. Start up companies that were started in a garage less than 20 years ago are now billion dollar companies on the back of real estate advertising. The price that agents and home sellers have been asked to pay for a web listing has increased nearly every year for the past 2 decades. 


Agents happily went along with the price increases because they simply passed the increase onto the vendor. Now, the vendor does not want to pay!


We are now at a stage where the market is beginning to reach a price resistance point. Private sale companies promising to save the consumer commission flank agents to the left whilst excessive advertising fees flank them to the right. The real estate agent is being squeezed by a cheaper competitor on one side and an unjustified expense on the other. Agents need to innovate to survive.


Agents that have signed lengthy contracts committing to put every listing as an upgraded prestige or premiere listing are feeling the price pressure the most. Consumers inherently know that you don’t need to spend $5000 or $10,000 on web advertising to find buyers.  Particularly in a boom.


The vast majority of the money spent on web promotion is about building the agents profile or brand. There is absolutely no research to suggest that home buyers respond more favourably to a property because it is or isn’t a large expensive advertisement.


Home buyers buy homes not real estate advertisements. Sellers are well advised to keep this in mind.


If an agent asks you to fork out huge amounts of money on a expensive web campaign, tell them you want to sell your home, not buy advertising. If the agent passionately believes in the product, they can pay.


It is this push back from consumers that is inadvertently driving off market transactions.


The consumer refuses to pay for expensive web ads and increasingly, so too are the agents. And off market transactions are increasingly becoming the happy medium between agent and consumer.


It is understandable that consumers will need to weigh up the potential benefit of listing on the open market vs trading off market.


Agents are increasingly building real and perceived benefits into their pitch when it comes to off market selling.


The consumer needs to ascertain whether the agent is simply looking to avoid the excessive advertising costs to which they have committed.



Peter O’Malley

Harris Partners Balmain

Author: Real Estate Uncovered

Comments

Post a Comment

Popular posts from this blog

OUTLOOK FOR 2016

Image
With the New Year well and truly here, many of us start wondering what the property market will look like this year. 2015 provided a roller coaster ride for the property market, with 2016 looking like a promising year. VZ Real Estate’s Managing Director, Michael Verstandig has provided his predictions for the year ahead. Interest Rates “Record low interest rates will be maintained for 2016, there is nothing in the reserve bank outlook suggesting otherwise,” says VZ Real Estate Managing Director Michael Verstandig. “Chinese growth is also slowing, which could leave the Australian economy vulnerable. However, the transition to the non-mining economy looks on track with household spending, retail and construction all holding up and without the risk of high inflation.” “This helps maintain affordability in South East Queensland – people can still borrow without a great fear of being smashed by the banks increasing rates. Low interest rates certainly help make pr...
Read more

FIVE MISTAKES TO AVOID WHEN INVESTING IN PROPERTY

Image
1.       Not doing your research When purchasing an investment property, it’s important to do your research about the location, local amenities, rental yields, vacancy rates and the property itself. While it may not always be possible, you should aim to know as much as you can about the neighbourhood you intend to invest in. Be wary of ‘booming markets’ such as mining towns and tourism centres. These may produce excellent returns over the short term, but how will the investment stack up long term if there is an industry downturn? Remember, a good investment is not one based on speculation. 2.       Not having a professional property management team in place Many people assume property management is simple and think they can do it all when it comes to taking care of every aspect when managing their property. This can quickly become a stressful and tedious task, not to mention the ever increasing legislative r...
Read more

SELECTING A PROPERTY MANAGER

How to avoid the worst and select the best When it comes to investing in real estate, the greatest fear after buying the wrong property is selecting the wrong agent to manage the property. Many investors have found that it is better and safer to actually self-manage their property. However, this is not always a practical solution for investors and therefore finding the right agent is imperative. The success of an investment property is largely dependent on the property manager. The market conditions may rise whilst you own the property, but if the tenants are constantly in arrears and flee with rent owing whilst the condition of the property deteriorates due to neglect, the success of the investment will be diminished. A pleasant gain is turned into a painful lesson. To select the right property manager for your asset, it's important to work toward a set criteria. Salesperson vs Property Manager Selling a service and managing a property are completely different skill sets. It...
Read more