Test Ad, Good Business Practice or Fraud

Many in the mh and mhp industry recommend the use of “test ads”. The test ads are used for the submittor’s benefit to obtain market information. The submittor then uses the market information for their personal gain.

When submitting a test ad, the submittor does not have the product or service they are advertising. The submittor knows they do not have and cannot provide the product or service at that time. The submittor has no intention of providing the advertised product or service at that time. The submittor may be able to provide the product or service in the future, but that is not what the test ad states.

According to the Federal Trade Commission (FTC), “advertising must be truthful and non-deceptive . . . advertisers must have evidence to back up their claims . . .”.

Essentially, the law states that your advertising cannot be misleading. You have to tell the truth, or clearly label your ads so that no reasonable person could mistake your intent.

The recommended test ads are a violation of the FTC law.

This also raises a moral question on running ads which the submittor has no intention or ability to fulfill. The submittor’s justification is the potential financial gain. Remind anyone of the recent wall st and mortgage scams?

If you switch to the other side of the fence, how would you respond if another party was running an ad for a product or service which you wanted and you found out the other party had no intention of providing the advertised product or service?

There are other techniques to obtain market data without running fraudulent test ads.


As an example, a recent post stated there are several reasons for test ads.

  1. It’s a great barometer of what’s going on in a market – much better than any educated guess based on employment, diversification of jobs, etc.

  2. Some of those currently occupied homes will become vacant when you evict tenants for non-payment and they run off. You better be able to re-sell them or your vacancy will skyrocket and your 55 occupied could become 50 pretty fast.

  3. I assume part of the upside in this deal is to fill those two remaining vacant lots. Without demand, you can cross that off as an option.

  4. Every other smart buyer today is going to run a test ad and, if it does not pull in that market, it will hurt your exit strategy.

You should consider a test ad as essential as a Phase I on every property. and since it only costs about $200 to do it (often less), you’d be crazy not to.