Thursday, November 15, 2007

Truth in Advertising



I was minding my own business today at lunch. Idly munching on a sandwich reading the weekly Real Estate marketing newspaper's condo section when something dawned on me. It was like a bright light on a gray day, as if the clouds opened up and a single beam of sunlight had penetrated through creating my own little private opening of Highway to Heaven. What was this brilliant insight, you ask?

Truth in advertising. It's missing from the real estate market. But it's law in the securities industry. Why isn't truth in advertising required for the "investment" that is constantly being pumped in this town?

Case in point: The Julia is having a hard time selling out right now. The ad in question states "priced below market value to sell out the project." How can something be priced below market value? It simply can't. Market value is the value the market will bear and the only time somethings' market value can be determined is at the exact moment that it is sold. And market value is constantly changing as a result.

So they could have written priced below assessed value. Except that they haven't been assessed yet. They could have written priced below appraised value. Except appraised value has nothing to do with investing. And these "marketing systems" are about making me think I'm going to be rich by buying this over-priced 2-bedroom condo.

Market value tells me that there is a market for this product and the price will fluctuate. Telling me that I can buy a unit below market value is the same as telling me that I can buy the unit today and sell it for more tomorrow simply because I got it for less than market value. Which is clearly not true.

I also noticed that there are a number of Rennie wannabes springing up in this town. It seems every Realtor with a condo listing is somehow an owner of a Marketing System TM.

At one point in time in the BC Legislature a normal citizen could enter a bill for legislation to make a law. I'm not sure if this is still possible, but I believe it is time for all investments to be subject to the same disclosure laws as securities. I can see the headlines when the market turns "Angry citizens outraged by guaranteed investment salespeople, used to be known as Realtors."

13 comments:

Anonymous said...

My comment has nothing to do with real estate because I am so close to being real estated out (but not enough to hang myself by buying) but thanks for posting that youtube video. It was the best laugh I've had all day.

S2

condohype said...

With every ridiculous marketing claim, the real estate industry is threading the noose to hang itself.

By the way, HHV, I appreciate you stopping by my site and offering your encouragement. I'll keep writing if everyone keeps reading.

Anonymous said...

I just about spewed my java, thanks for the laugh.

formerfarfromhomegal

Anonymous said...

"I also noticed that there are a number of Rennie wannabes springing up in this town. It seems every Realtor with a condo listing is somehow an owner of a Marketing System TM."

I've noticed this as well, and find it distasteful and self-aggrandising. What exactly IS a real estate "Marketing System" anyway, other than the same techniques that everyone else uses, burnished with glitzy signage and hyperbolic ad copy? Hmm... maybe "Binab & Strasser" can explain it to me...

VicREBear

hhv said...

I thought a RE marketing system was a perversion of a bad jingle played on an out-of-tune guitar and sung by someone who has no business singing on channel 17.

Anonymous said...

From today's Times Colonist: Bear Stearns credit rating cut

http://www.canada.com/victoriatimescolonist/news/business/story.html?id=0955a20c-e3d7-4ceb-ad26-fe4defd44ee7

S2

Anonymous said...

Silly T/C article today pronouncing that average SFH price will be over $600,000 by the end of next year. All the usual expert suspects rolled out, and all the supposed "strong fundamentals" are extolled, much the way they were in now-crashing US bubble cities a year or so ago. I love the economist who says, "...it would take a "catastrophic" event, such as a spike in interest rates, global financial correction or a recession, to trigger a price decline." All of those scenarios seem pretty likely to me in the next 12 to 18 months!

VicREBear

Aleks said...

Enh, Vancouver got to over $600,000 median for SFH without any fundamental basis (and then $700,000, and then $750,000...) so it's entirely possible we could get there too. Doesn't make it sustainable, of course.

Anonymous said...

Of course, if $600,000 is the new projected peak average price for all of 2008, that isn't even 3 percent over the September 2007 high of $584,193. Not much to write home about investment-wise, and actually a loss if you bought last month and end up for some reason having to sell at the end of '08. For investment purposes, the average by this time next year had better be well above $600,000 to sustain the belief of the speculators.

VicREBear

vg said...

"it would take a "catastrophic" event, such as a spike in interest rates, global financial correction or a recession, to trigger a price decline." All of those scenarios seem pretty likely to me in the next 12 to 18 months!"



Most analysts worth their salt are calling for all three and are adjusting their clients accounts to reflect that. Right now there is alot of fear out there and these idiots have their heads in the sand preaching increased prices with reductions all over the place.

Anonymous said...

Today's Times-Colonist article:

Risks to world growth have grown: Dodge

http://www.canada.com/victoriatimescolonist/news/business/story.html?id=6caa81f0-1fec-4ff0-b369-bba12703aa12&k=29992

S2

Anonymous said...

Someone suggested contacting "Binab Strasser" to find out what a marketing system is, so I thought I would do just that. They are RE/MAX agents, so I called 386-8875 and had them paged. I got a call back in about 10 minutes, which given my experience with Realtors in the past, was surprisingly quick. It was David Strasser that called back, his partner is Jason Binab. I feigned interest in a condo project they have for sale in Cadboro Bay, "The Promenade," and then mentioned I had noticed their name associated with "Marketing Systems". I asked him what exactly that meant.

The response was not what I was expecting. According to David, the Marketing Systems side of their business is actually a service they provide to other Realtors and "Business Professionals". Apparently, Jason and David help small businesses brand their identity and advertising, etc. They work with a Design team and consult as business/branding coaches.

I asked him if he had heard about Rennie Marketing Systems in Vancouver. He said of course he has, who hasn't. He said that RMS is the name of a Real Estate Company, where as for Binab Strasser Marketing Systems Inc., it is the name for a Branding company. He said Binab Strasser does all of its real estate sales under their brokerage name, which is RE/MAX Alliance.

Long story short, I was quite impressed with my conversation with him. He went on to talk in a lot of detail on the importance of branding and how it has a profound effect on sales success in real estate.

He did mention that brand presence has had a strong effect on how condos are marketed. He seemed to think that because most new condos, especially pre-sales, are fairly similar in a lot of ways, that Realtors depend on branding the condo, just as they would themselves, in order to distinguish it from everything else.

As big a skeptic as I usually am, I think I might actually call these guys if I had to sell or buy something. David's knowledge was extremely comprehensive. Then again, for sale by owner would still probably be my first approach.

Anonymous said...

branding is evil, at the heart of our degenerate society. it emphasizes imagery and disinformation in order to delude consumers, resulting in uninformed consumers making irrational choices. this is of course the opposite of how markets are supposed to work (informed consumers making rational choices). the recent collapse of the financial system is testimony to this.