Anatomy of an Apt Sale: Marketing Costs
Given the softer housing market and likely rise in do-it-yourself FSBO's out there, I was motivated to write about advertising and marketing. Many people may not realize what marketing and advertising costs are, especially as apartments sit on the market longer. So, here goes using a real listing:
Analysis of 115 e 9th St, Apt 18D. THREE MONTHS on the market (and counting)...
Listed 9/4/08 at $825K, price has been reduced to $750K.
Professional Photos: $525
Floor Plan: $150
Postcard mailing to building: $332
Postcard mailing to my personal mail list: $275
5 line NY Times ads: 9/21, 9/28, 10/12, 10/19, 10/26, 11/2, 11/9, 11/16, 11/23
@ $100 each = $900
Selected for Corcoran Taxi Cab Ads (ad runs one week): $500
Ad put in Properties For Living Magazine (distribution of 150,000): $500
Table/Chairs purchased for staging balcony: $120
NY Times on-line advertising for 3 months (87% of buyers start their search on-line): paid for by brokerage
Ad sent to 200+ brokerage firms through MLS-type database: paid for by brokerage firm
E-blast to 3,000+ contacts: paid for by brokerage firm
Color Marketing Sheets: paid for by brokerage firm
=======================================
TOTAL: $3,302 in advertising / marketing expenses covered by brokerage firm and agent
Were an owner advertising this on their own, they wouldn't do the taxi cab ads, the Properties for Living Magazine, and probably not the postcard mailings. However, their on-line and print advertising costs would be significantly higher because they would be paying for the NY Times online and print ads at the retail rate instead of the bulk rate that large brokerage firms receive. The retail rate is $130 for 14 days (87% of buyers start their search on-line, so you basically have to pay for this if you want to sell your apartment). If you want 14 days on-line and one print ad, the NY Times charges $280. So let's say you wanted the NY Times online for 3 months and about half the amount of print advertising that a brokerage firm would do, it would cost $1,680, which is about the same cost as the taxi ads, Properties for Living magazine, and postcard mailings.
If you have a good quality color printer, marketing sheets for your apartment wouldn't be very expensive, but if you wanted professional quality marketing sheets, they will run you around $1/piece at Kinkos.
So for advertising/marketing your own apartment for three months, you would likely spend at least $3,300.
Most people selling their own apartments offer (or eventually break down and offer) 2.5%-3% commission for a broker who brings a buyer. According to market research by the National Association of Realtors (yes, I realize this isn't the most unbiased source but no one else really compiles this data), 85% of buyers use a real estate professional.
Toes says: Many people don't realize what the real advertising and marketing costs are for selling an apartment. Make sure to have a marketing plan and a conservative budget if you try to sell your own home; account for a possible longer time on market & therefore a higher ad budget rather than assume your place will sell in 4 weeks. The best way to keep your costs at a minimum in the kind of market we are in right now is to price the apartment at least 5% below anything similar on the market.
Toes says: Frequently the buyers looking at for sale by owner listings think that they are going to save the broker's fee in the purchase price. Simultaneously, the seller also believes that they are saving the brokers fee as a closing expense, when in reality they might lose out on a higher bid. They say maximum exposure = maximum profit potential, and I do know that the majority of transactions in Manhattan are co-brokered, with an incentive offered to the buy side broker and full exposure to the brokerage community via internal listings systems. I have heard from FSBOs that the majority of direct buyers viewing their apartment were "bottom feeders".
Toes says: If you are trying to sell a co-op yourself, make sure you are aware of the financial requirements your board is looking for and how they want the board package prepared. Although there are no statistics that I am aware of, anecdotally, there are likely more board turn downs for FSBO listings.
Comments (21)
Thanks Noah - something I've been curious about and would appreciate your POV re: clearly the mortgage brokeage industry is about to get slapped around for a while (and most likely will re-emerge a very regulated segment through direct as well as indirect measures) but what about the resi brokerage world? clearly there is a different level of sophistication (read: value-add), generally speaking, in the higher value markets - laws of competition kind of drive that one - but in the middle market (e.g. NJ, Queens, etc. not necessarily Ashtabula or some average MSA in the FL panhandle), what do you see happening with the industry from a regulatory vantage point? Hillary is completely beholden to the NAR so they've got the political winds to their backs but isn't it just a matter of time before some lawyer takes on the brokers for misrepresentation, thereby precipitating a conversation? i liken the industry to full service securities brokerages pre-dot.bomb - all you need is the right platform and clearing processes to dramatically reduce the expense associated with real estate closings.
Posted by Fred | December 2, 2008 1:57 PM
I don't think you need to pay $150 for the floorplan. I would imagine that you can save the money by getting the floorplan of a similar apartment in the buuiding from when it was listed. If you have a 1 bedroom for sale on the 2nd floor and the same one for sale on the 5th floor, you can just use their floorplan.
Posted by Donald | December 2, 2008 2:18 PM
I usually get floorplan from managing agent or via internal systems, when I prepare a new listing..If both dont have it, I look at previous same line sales to see if I can get it or similar past sold lines that may have it, of course measuring to verify the #s.
If that fails, OLR builds a floorplan and I actually had to buy one for my E Harlem townhouse sale, it cost about $750, and took about 3 hours for the guy to come in and draw up the dimensions and layout for all 4 flights and basement and garden, and then put into digital format for marketing
Posted by Noah | December 2, 2008 2:44 PM
ps: thank TOES who wrote article!
Posted by Noah | December 2, 2008 2:50 PM
why would you pay for a print ad in the nytimes, does anyone read those anymore or use them to find open houses? do buyer's borkers look there?
Posted by Anonymous | December 2, 2008 2:58 PM
Toes says: "The sky is not falling, people!"
Ha ha... no, I'm just bustin on her. Toes is a cute lil broker-broker.
Posted by anon | December 2, 2008 3:04 PM
This is so spot on, marketing is expensive since few people ever "market" (unless they run their own business) they have NO CLUE! Or if they think they do they don’t know where they should allocate the money...Or they do everything right (marketing wise) but are high on the price netting them essentially no interest, at that point they don’t know what part of what their doing is right or wrong....
Posted by Michael Oliver | December 2, 2008 3:06 PM
Anon - well might as well add the print to the list! Most sellers will demand this if they agree to a exclusive listing that ultimately has them paying out a 5-6% commission! The seller will want all venues to be used at the firms disposal...
But I agree, print ads are not nearly as effective as they used to be, which puts the broker in more control over what venues should be utilized for a specific property's marketing, and which should be focused more heavily over others!
Posted by Noah | December 2, 2008 3:22 PM
What happens if the seller refuses to sell the apartment after all these costs are incurred by the agent? Who is liable for them?
Posted by EV | December 2, 2008 3:56 PM
noone! The agreement pretty clearly states that commission is only owed at closing of the transaction. The broker does hand in a list of say 6 buyers that the seller is liable to pay a commission if they sell to one of these people during X period of time
Posted by Noah | December 2, 2008 4:13 PM
Properties for Living is a waste
Posted by Buyer | December 2, 2008 5:51 PM
"What happens if the seller refuses to sell the apartment after all these costs are incurred by the agent? Who is liable for them?"
The agent. Sellers usually don't "refuse" to sell unless they get a lowball offer or the buyer makes unreasonable demands.
Posted by Donald | December 2, 2008 6:05 PM
Whats properties for living?
Donald - yep, except if seller has a change of life decision OR decides for whatever reason not to accept a bid afterall (testing market?), even if it was over ask by 100K. yes, happened to me. Anything goes in this business and brokers get treated pretty harshly out there as the reputation is not the best in general
Posted by Noah | December 2, 2008 6:11 PM
Selected for Corcoran Taxi Cab Ads (ad runs one week): $500
Ad put in Properties For Living Magazine (distribution of 150,000): $500
This is what I referred to at "Properties for Living" (the mag).
Actually, both are a waste. 1/3rd of the cost gone.
Posted by Buyer | December 2, 2008 6:27 PM
Even if I assume that the $3,302 on marketing expenses are correct, that's only 0.44% expenses on a listing priced at $750K .... a pittance in other words. I remain entirely unconvinced.
Posted by chris | December 3, 2008 7:41 AM
well Chris keep in mind that brokerage firms take 50-60% or so of the agents cut, and the agent does all or most of the work. Im not supporting brokers here, ore telling you to cry for them, not at all.
Just saying that agents dont make as much as people think in the end, especially since most deals are co-brokered as that usually brings in the best price for the seller. Its the model that is flawed!
of course, its great for the brokerage firms who get 40-50% of each rats cheese that is brought to the home nest for relatively little costs.
But I think this model is done.
Posted by Noah | December 3, 2008 9:08 AM
sorry meant, 40-50%
Posted by Noah | December 3, 2008 9:34 AM
taking the middle person is always a win/win situation for both buyer and seller, especially in an asset class where bid/ask is so wide.
Posted by anon | December 3, 2008 10:25 AM
I think its coming ANON, except people will need to USE the service if its introduced or else the model that benefits buyers/sellers will get squashed!
Im workin on something
Posted by Noah | December 3, 2008 10:27 AM
Hi Everyone, I have gotten leads from our taxi cab ads as well as the Properties for Living Guide, a full color magazine that goes out as an insert in the NY Times as well as to every Corcoran office.
Also, I know it's surprising, but I have gotten two customers who do NOT use the internet, they only use the paper version of the NY Times. I have an offer in on an apt the the buyer would have found on their own but the other agent only advertised in the NY Times on-line. So there are still people out there who don't use the internet!
Posted by Christine Toes | December 3, 2008 11:54 AM
And as far as the floorplan, we always use a similar floorplan if there is one, but in the case of this apartment, I had to take all of the measurements and have one done because it is a unique line in the building.
Also, I have floorplans professionally cleaned up if whats in our database is hard to read. Sometimes over the years, people make alterations and you need to have them altered on the floorplan.
Posted by Christine Toes | December 3, 2008 11:56 AM