A former chief govt of the Information Corp-controlled realestate.com.au says the corporate views actual property brokers as its “outsourced sales force”, outlining how dwelling sellers have been focused with ever-rising promoting prices.
Simon Baker, who was chief govt of REA Group from 2001 to 2008 and now works as a guide within the property tech trade, says the “vendor-paid” promoting market working in Australian actual property is uncommon globally.
A vendor-paid market is the place the vendor of a home pays for the prices of promoting with the actual property portal – comparable to realestate.com.au or Area – individually to their payment for an agent. This isn’t the case in lots of international locations.
“Vendor-paid markets are fantastic in the way that your customers – the real estate agents – are not the ones paying your advertising bill,” Baker stated in a podcast interview in February for the property trade web site On-line Marketplaces.
“The other thing that’s fantastic for the agents is that their brand is all over the advertising … so they’re actually getting the vendor – the home seller – to pay for the promotion and the branding of the real estate agent.”
Baker stated the corporate had designed advertising packages to incentivise brokers paying to have their listings on the primary web page of search outcomes, creating increasingly more “premium” presents that saved costs growing.
“That’s sort of how this all works nicely over time to create this ecosystem where it just keeps pushing the price up, and up, and up.”
He stated promoting prices had elevated considerably because the web site was first established, rising from as little as $50 per itemizing to a situation now the place realestate.com.au would cost 1000’s of {dollars} to look excessive in search outcomes.
A July 2024 value record for REA Group reveals that an inner-city itemizing in Sydney and Melbourne now prices virtually $4,000.
Baker stated an individual promoting a house would look to an actual property agent for recommendation and brokers would suggest premium promoting packages as a result of distributors have been anxious to get the very best sale value.
“The agents are very good at leaning on the vendors to get them to pay an advertising bill which is now not in the hundreds of dollars or euros per property but in the thousands,” Baker stated.
When requested if he believed the premium packages have been a very good funding, and whether or not he would pay for them himself, Baker stated he wouldn’t.
“I think these portals are making a lot of money selling a product that at the end of the day if it didn’t exist I don’t think it would change the underlying market dynamics much at all,” he stated.
“It’s just there would be more money sitting in sellers’ pockets.”
Underneath REA Group’s pricing mannequin, actual property brokers are incentivised to buy “Premiere all” packages that oblige sellers to take up the costliest promoting choice.
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Contracts enable brokers and distributors to “opt out” of the costliest promoting packages, however brokers are restricted by the circumstances of their subscription package deal in what number of listings they will downgrade to the cheaper choice.
This implies brokers are successfully binding sellers to the dearer providing as they’re contractually certain to make sure between 80% and 90% of distributors pay for the dearer promoting package deal.
In an interview with Guardian Australia, Baker stated REA Group was considered “jealously” by different property portals globally because it takes a a lot larger share of promoting prices than in different markets.
He stated there was “absolutely” a symbiotic relationship between brokers and the portal, and the corporate had very intentionally focused brokers so as to improve income.
“There is this game being played. The agent is promoting the house but also promoting themselves,” Baker informed Guardian Australia.
This results in the brokers recommending the dearer ads, however Baker questioned whether or not these merchandise have been worthwhile.
“The real question is does buying the premium, super-premium make a real difference when it comes to the buyers – not the people who are looking, but the real buyers. And I think that is probably the real question that if I am a portal I don’t want to have answered,” he stated.
“If you didn’t have all the advertising paraphernalia around it … if you took all of that out and just had one sized ad on REA, I don’t think you would see any material decrease in the volume of buyers engaging with agents.”
REA Group declined to remark.
