Ask a Coach: Should I Pay for Real Estate Leads?
There’s no doubt that lead generation programs make big money – for those who sell those leads to agents or for brokerages who ask agents to come to them with a promise of leads.
In my opinion, however, these are huge money and time suckers for agents. I believe that Steve Murray (senior adviser to Actual trends) once wrote about how agents on average pay over $3,300 per lead closed from these sources. It’s not the worst.
The worst part is this: Agents say these leads are secret 1% to 4% of the time. This means that for every 100 leads an agent tracks and nurtures, only one to four of them end a closed deal. So they wasted their time on 96-99 people.
Who do buyers and sellers work with?
the National Association of Realtors clearly shows each year in their studies that the vast majority of sellers and buyers (well over 80% each year, sometimes closer to 90%) work with one of these types of agents:
- Someone they know personally.
- Someone they have done business with before (as above).
- Someone they were referred to by someone they know.
- Someone they met on a phone call or at an open house.
So very few buyers and sellers come from lead generation programs, and I don’t see that changing. It’s not hard to generate leads – businesses can generate leads all day with their artificial intelligence.
But, while people will get their information from anyone, almost 90% of the time they do business with someone they know. Consumers are getting smarter and more cautious when it comes to trading real information for information. This means that the “leads” generated are increasingly poor (fake names and temporary email accounts) than ever before.
What is the solution?
Cultivate relationships with enough genuine, enthusiastic fans of your work to recommend others to you and build enough loyalty to achieve your goals.
I know of several agents with no more than 161 VIPs generating up to 90 deals per year, and not buying any leads or mass marketing to anyone. That’s more of a 50% return versus 1% to 4%. These agents simply create and follow a plan with a small group of great people and reap the rewards.
Yes, they hold open houses, take calls and agent-to-agent referrals. But most of the business comes from this small, carefully selected VIP list.
I did some research and found something called Dunbars Number, which says people can only have relationships with up to 150 people.
It is no coincidence that so many agents, when asked to sift through a list of thousands of people in their databases, and select only those who meet their self-identified minimum standards and are people they really like and would like to do business with or receive recommendations from – somewhere in the range of 100-161. Our brain demands a number around it.
The idea that we have to sell to thousands of people to achieve our goals is not true. I’m working with a small group of agents to test this from scratch with a Mastermind group/
- 150 of the good people. (Or less)
- Choose some of the 150 possible things to do with them.
- Work 150 days a year.
This is how it works. Try that.
1. Identify what you want from your job in terms of income and time.
2. Determine your minimum standards for square footage, price range, average revenue per fence, property type, etc.
3. Go through the lists you have now to create a group of VIPs – no more than about 150, but enough that you can reasonably expect to reach your goal. For example, I have a coaching client whose average price is close to $1 million and she only keeps about 80 people in her VIPs because she doesn’t want or need to do a lot of transactions. She prefers to spend more time with her grandchildren and her hobbies.
4. Now that you have the right people who match your goals, the next step is to create a plan to create relationships that lead them to know you, like you and trust you so much that they will recommend you to others.
5. Finally, create a timeline that supports your plan actions. We think you can do it in a maximum of 150 days per year.
To answer your question: I’m not a fan of buying leads that drain you both in cost and worse in time.
Donna Stott is a real estate consultant specializing in agent and brokerage business.
This column does not necessarily reflect the opinion of the editorial department of RealTrends and its owners.
To contact the author of this story:
Donna Stott at [email protected]
To contact the editor responsible for this story:
Tracey Velt at [email protected]ealtrends.com