I do something similar for a few clients, so I'll give you my two pennies on it.
Some prefer sites like Vimeo and some others but mostly its because of HD support and quality but they are things the average consumer doesn't really care about. I don't feel that the youtube watermark is a turn off to the average consumer because its really a household name to them, they see it everywhere. It may look taky to us but they don't really care and the point of the video is to use it to sell something, in this case...houses.
Even though I film in HD, I export the final in SD resolution to avoid the buffering stops of youtube and keep playback smooth. The last thing you want to do is loose the attention of someone you are trying to sell something to. Also its how the video was done that sells not the res quality in my opinion.
The main thing about youtube is its response to search engines. If you put good tags on it your video will be near the top of a search for "Houses for sale near ____" and direct people to your clients site, just make sure you include a url on the youtube page and in the video. Looking at web stats, I see a lot of traffic comeing from youtube and that only happens from then finding the video first. Some other hosting sites are not bad about coming up in searches but youtube seems to rank #1 for that, it might just be because of people knowing the name so well. The video can also be placed on a site in different ways to make it look more professional.
