Creating a Marketing Budget

Budgeting for Sales Commission and Other Marketing Expenses

The standard real estate sales commission today is 7 percent. Some affordable housing developers try to negotiate a better price with a particular real estate agent in exchange for the exclusive rights for him or her to list all the developer’s homes. Other developers consider paying a premium commission – more than 7 percent – because of the homes’ low prices, funding regulations that limit the pool of potential buyers, the challenges of selling homes in a tough neighborhood, and a desire to incentivize the fastest sale possible.

Some marketing costs are expected to be covered by the listing agent as part of their service to earn the commission, such as signs, a flyer, a page on their website, some advertising, some open houses, etc. The agreement you sign with the agent should be specific about what services the agent will perform. However, you will very likely want to budget for other marketing activities, such as additional and more frequently updated flyers or postcards, special open houses, radio ads, incentives for block beautification, a website of your own, etc.

For these other marketing costs, your plan will ultimately influence your budget, but some developers budget a percentage of the home price. This varies from 0.5 percent to 4.0 percent, depending on the volume of homes and whether you include staff salary costs.   If your homes are priced very low because of a weak market, you may want to budget a larger percentage to have enough of a basic budget with which to market the homes effectively. Check with your funders (if applicable) to determine which marketing expenses are eligible for reimbursement. For example, the Neighborhood Stabilization Program (NSP) allows for reasonable marketing expenses in addition to a real estate broker commission, as long as they can be associated with a particular address.

Click here for worksheets to help you develop your marketing budget.

In the final chapter, you’ll learn how to pull together all of your worksheets and other information in a marketing and sales plan document.