REA – The Unwelcome Third Party

 

Recently, I received an email from an agent I have known for some time.

A great agent, a great businessperson, and a great guy!

 

I speak to many agents every week and have groups of agents on socials where we talk all things real estate. REA is a topic often.   Why? REA has trained agents to be their salespeople. Agents now most times have to pass HUGE costs to the home seller to advertise their homes.

I would love your thoughts on this agent’s concerns.

 

Here is the email from the agent –

“We are entering 2025 with challenges not seen in Real Estate.

REA and Domain have become the unwelcome silent party of our businesses, challenging how we view our clients.

I’m talking about the pricing structure of marketing on digital platforms, controlling our marketing, restricting exposure on these platforms, favouring business relationships with these agents based on what we spend.

This style of operation is not new, to me, this is unconscionable behaviour and threatens the financial existence of Real Estate Agents and Businesses.

We are aware of the boom in our industry, this boom has generated wealth across all areas of property.

I fear 2025 will see big changes in this wealth and how we are being forced to do business.

What I am referring to is vendor-paid advertising. Advertising platform costs have grown at extraordinary rates due to little competition. There is no real choice but to bow to the demands of these platforms.

What threatens small business operators is holding these costs until a property sells. Whether it’s a vendor-paid marketing fee, part fee,  or absorbed in your commission. If a property sells in a month to six weeks, the cash flow to account payment will not be drastic.

As the market slows, sales take longer and stock builds, agencies will no longer be able to hold these costs until a sale. It will become mandatory to charge up-front marketing costs or put your vendors on a payment plan with a specialised finance package.

Owners won’t be happy with you if they are paying interest on a property you haven’t sold.

Further problems will become the new issues in running your business. The focus is now on being able to sell your marketing package. You may be an excellent prospector, able to build relationships, but if you can’t sell marketing packages you will need to find another job, the office can’t financially carry you.

Selling your skills to a vendor is no longer the number one skill needed in the industry, it will be how well you can sell a third party’s product to your vendor.
It’s not about the client, it has become about money. Selling financial packages to people who can’t afford it, eroding commission agents receive due to excessive marketing costs.

How did our industry of helping everyday people sell their homes become a greedy money-grabbing industry, feeding parasites at every turn.

There is so much more to be discussed.

In my view, I believe our businesses will be challenged like we have never seen before. I believe it is too late to change the model forced onto agents. We can adapt until the next round of price increases and then the next. If the increase rate continues, it will end up a 50/50 split with an unintended third party to your business.

I have survived in business for four decades by finding solutions to issues as they arise. For the first time, the challenge ahead is larger than the solutions. My very makeup of running a client-based business is ethically challenged by unwelcome business partners whose core values are not aligned with my business ethics. Putting money before clients is a path to failure.

Take a look at the options with marketing costs –

The obvious solution is to get full marketing costs upfront or on a payment plan. Or get the vendors to borrow the money and pay interest until the property settles.

We could include marketing in the agreement to be paid at settlement or when withdrawn.

We could cover part marketing costs and carry the financial burden.

We could use cheaper marketing options with less exposure for the client and the business.

These options are not solutions.  The financial burden is still on either the client or the agent.

There are many situations that will put extreme pressure on agents when deciding on taking a listing.

When selling property, you need flexibility with your clients. With the pricing model, all consumers are treated the same – these portals don’t have a conscience.

Real-life scenarios

I’m selling a villa for a lady going into a retirement home. She has a reverse mortgage, no cash. Has to sell.
There is no way she has money for marketing. For me signing her up to short term money to cover marketing is not ethical.
I will carry the marketing or walk from the listing and another agent will do what I deem as unethical.

Second scenario

I have a number of townhouses I’m selling. Marketing at $3,000 per unit is $24,000 dollars. If I package the units into one or two ads (as we used to do) I could market for $5,000.
The problem is I don’t get a sold credit on each unit. I need to market individually and either pay for each unit or only have two sales credited instead of eight.

 

In July, my REA rollover for another year happens with the normal %increase. In March I need to make decisions on what I am doing otherwise the notice is too short.

My first idea is to cancel RPdata and use Price finder. My next thought is to go premium with Domain and low-end with REA. Basically, aligning my loyalty to domain.
Something must give; the costs are just out of control (as you know). Business commerce we were taught elastic and in-elastic costings, in the new world elastic is the norm.

I have shared this information to help you know the feeling in the Real-estate world.”

 

 

This is the opinion of the writer of the email  –  What does everyone else think?

 

Lisa B is powered by eXp Realty