Do Real Estate Agents need to charge VPA?

3 Apr 2019

In the second part of this insightful two-part series, industry coach and digital expert, Lisa B explores why agents need vendor paid advertising.

As a coach, I talk to real estate agents every day about how they’re doing. We talk about sales, we talk about business, we talk about profits, we talk about what’s upsetting them. We talk about what they need to do to move forward. We talk about what they need to do to make things better.

No matter which way you look at it, business is about making a profit. No one wants to risk everything they have, only to break even or worse, lose money. Business is not a charity, it’s about working hard to help your clients, but it’s also about providing for yourself and your family and also achieving your goals.

Now let’s talk real estate business mechanics

Agents generally operate, and have a preference for, one of two methods with regards to advertising:

1) A ‘No Sale, No Charge Policy’

2) ‘Vendor Pays Advertising Policy’

And some mix it up a bit.

Some real estate offices are trying very hard to financially support LAVISH advertising programs for properties they have for sale. These agents can definitely feel added pressure as they stare down the barrel of some pretty hefty advertising bills.

Some of those that AREN’T obtaining advertising money from their sellers, are finding the economic effects crippling them to near breaking point.

If this sounds like you, you need to do something now BEFORE it’s too late

 You have 3 options –

1) Enforce a VPA strategy

2) Scale down the style and frequency of the advertising you are using

3) Increase your commission and better demonstrate the value you are adding and the benefits of not charging upfront VPA

For any agents that don’t have VPA and are trying to keep up with agents that DO obtain advertising money, please be careful you are not heading for financial downfall.

How does this happen?

Agents can feel pressure to offer marketing included in their fees, not as an extra, to try to secure the business without really knowing the REAL cost of doing so to their business.

Before we go on.. know this. Some owners WANT their property promoted everywhere.

Some will believe in the concept of VPA and others won’t.

Know if you don’t ask the sellers what advertising mediums THEY want, you may risk losing the listing to another agent that has sold the benefits of broader advertising under the promise their property will reach more potential buyers.

There are two schools of thought when it comes to Vendor Paid Advertising in a declining market (for those areas that are feeling the market changing) –

1) Owners can’t afford to stage a property and spend loads of money on a property with longer days on market.

2) Owners can’t afford NOT to stage a property and spend loads of money on advertising with longer days on market.

Which do you subscribe to?

You need to do the best thing for your vendor in order to get their property sold and you need to determine what that looks like for them.

You also can’t go broke in the process!

The market

If you operate under a ‘No sale, No charge’ model, consider if the market deteriorates and properties have longer days on the market in their area, you may struggle to pay large advertising bills out of your commission. Is that sustainable?

Longer days on market means owners could change agents and they could also withdraw their property off the market. An agent could literally go broke trying to pay the advertising bills with the exorbitant costs the real estate portals charge these days.

We are not in business to go broke!

With the huge costs real estate offices face, now more than ever, you need to be smart and think with a business mind.

Lisa B

EAC Industry Reporter
Real Estate Coach and Trainer
0412 210 558

Leave a Reply