Expensive web ads drive off market transactions

In this month's edition of the Real Estate Report, we look into seller's remorse. Many people are aware of buyer's remorse, but we look at how sellers increasingly experience many of the same emotions and how best to manage the process.

Real estate agents across the country are increasingly moving towards 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. However, 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 on to 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 agent's profile or brand.

There is absolutely no research to suggest that home buyers respond more favorably 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 an 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. Off market transactions are increasingly becoming the happy medium between agent and consumer.