VPA is not a dirty word: Edwin Almeida

If you are confused by the acronym VPA, you’re not alone. The truth is, most of the REI and Real Estate Agents (REAs) don’t know how to properly account for this in their books. Most REAs are oblivious that they are flirting with deceitful conduct and are in breach of the REI Regulations by not disclosing and accounting, vendor paid advertising costs properly. 

For many the term or acronym VPA is not well known. Expanded, it makes a little more sense: Vendor Paid Advertising. But only a little more, particularly when the REA is asking for: a commission and for a marketing fee. 

For most agents, VPA is a lifeline to their existence. However, the majority of agents don’t realise the gravity of their failure to account for the advertising budget paid by the vendor. As much as it is a lifeline, it can also be the detriment to their agency.  

You could well say that VPA is an industry in itself. Many agency’s guidelines and training manuals spend a lot of their focus on, “how to get the most VPA from clients”. There are industry icons and business leaders that charge large amounts of money to train wannabe agents on how to bask in the glorious platforms of the VPA-agent kingpins. 

For me, the position I take is simply this. “What are agencies or REA’s offering that is so different to warrant for the vendor to pay on-top-off the commission?” Many are muted by this one simple question, and why? All because the answer is basically, not much. 

Not discrediting VPA altogether, I believe it HAD a purpose and served a function perhaps as early as 5-7 years ago. At a time when most buyers were only just beginning to venture into the internet to look for property. From then onward, the internet has become the lifeline of REAs marketing and source of clientele to buy property and at a highly reduced cost to obtain interest in their client’s properties.

 Why VPA was necessary - to an extent. 

• Before the strong internet drive, most agencies relied on print media to draw the crowd. However, is print media still necessary in this climate?  and 
• Stand-out features, offered by the main property search-engines. 

Are these features necessary to warrant for vendors to pay fees almost as much as commissions? 

I believe the answer to both is unanimously, no. In light of my discussions with colleagues, it is a general consensus that VPA is mainly used to really “promote the agent”. The exception to the rule I believe to be more in “commercial and industrial real estate”. 

The anti VPA advocates, our beliefs are threefold. 

• First and foremost, if an agency receives funds from a vendor and is entrusted by the vendor for these to be used to advertise their property; it is deemed vendors funds and should be accounted for in the agency’s “trust account” not their general account. A practice not taught at the super giant VPA-seminar campaigns. 
• Second, and this goes back to my initial question; what is the agency offering for these extra funds (advertising costs) being charged to the client? 
• Third, is our own office belief that any funds provided by the vendor as an upfront marketing budget, the funds can be better spent on the presentation of the property. 

A VPA agent’s reasoning for charging advertising fees:

I asked a few colleagues that have attended the VPA training seminars and they are adamant that it is necessary to charge clients a marketing budget on-top-off their commission. Most of my colleagues referring to costs of running a business to justify their reasoning. Their arguments mainly center on the following notions: 

• Signboards and print media is costly. Hello! When was the last time you searched for property in a local newspaper and drove around neighborhoods till all hours of the night looking for signboards? 

• Advertising on the internet is costly. Yes it is, but every business has a cost to market itself and its products. Aren’t you receiving a commission to provide a service?

• We can’t break/split costs across all our properties and it’s difficult to manage. The regulations makes provisions to account for every expenditure to the client and in detail. Along with this is the requirement of disclosure of third party benefits received by the agency. Kickbacks, commissions and other fees paid for: printing and even online advertising, be it paid in shares or cash. 

Showing the figures of costs to vendors:

I have been criticized in the past for questioning the collective voice of the REI that we are not being paid enough and therefore VPA is critical to run a business. Placing the legislative requirements on how to account for VPA to one side, but not dismissing these, lets look at the numbers for a second. The numbers of current cost to do business. 

Median property values approximately 3 years ago and average VPA charges.

Current values 2015. Median home property values and average industry VPA charges.

My tips for people considering engaging an agent to sell a property.

When confronted with a ledger of costs before you even engage the REA to sell your home, simply ask the following questions:

• Where will the money go to? General account or the Sales Trust account?
• What are the individual costs for each proposed marketing idea/service that you recommend to be adopted?
• How much commission does the office receive from third party service providers? And will these come off my bottom line?

Most reputable agencies that do work with VPA, will issue clear statements and provide value added services. Some of the services I consider value-added are:

• Staging services
• Professional photographers
• Professional videos
• Cosmetic make-overs of property in preparation for the marketing

The most commonly used rebuttal used by the VPA-agent is: if you want better exposure than your neighboring competitive listing, then we need to make your listing stand out. If the agent/agency is more focused on a signboard and local print advertising to stand out just remember this; signboards mainly advertise the agent not your property. 

EDWIN ALMEIDA is licensee in charge of Just Think Real Estate.

He is also the creator of Oz Real Estate.TV and a presenter for propertyinvestingvault.com.