If real estate agents think dealing with online consumer inquiries is tough now, times are about to get even tougher. The really large lead aggregators are just now starting to enter the real estate market, which means there will be more leads being sold to agents and the leads will be lower quality since the number of home sales is not expected to increase.

Until now, there have only been a few tier-one lead aggregators in the real estate vertical, notably Realestate.com, HomeGain, Realtor.com and HouseValues. Even as smaller lead generators and second-generation newcomers with different models like Zillow and Trulia have entered, so far the space has been pretty tame.

But, from the looks of it, that is all going to change. I know firsthand of at least five large lead-generation companies that are migrating into real estate. These are companies that have cut their teeth generating leads in perhaps the most intensely competitive online vertical: mortgage. For two such examples, take a look at Nextag (http://www.nextag.com/serv/main/buyer/mortgages.jsp) and Quinstreet’s Guidetorealty.com (http://www.guidetorealty.com). 

To understand how things may change, it’s worth looking at where these lead aggregators generate their leads and how they monetized leads in the mortgage vertical.

Where they get their leads

Only a limited number of channels exist to generate online leads, including paid search, natural search (the “free” component of search), banners, e-mail marketing, affiliates/partnerships and contextual ads. Each of these has wildly different conversion rates, according to our clients’ experiences. Here’s the ranking in terms of best to worst, with a relative index:

Although there are clear differences by lead source, this should be a good proxy. Take a look around the Web before you buy from a certain partner and do your own research to determine where their leads come from.

How they charge for their leads

Once you figure out where leads come from, you need to determine the company’s revenue model and whether you are the only one getting those leads. Many of the mortgage lead aggregators sell the same lead up to five times. And it gets worse: The average consumer completes three lead forms, so if two of those lead forms completed are from lead aggregators, then you may be in competition with 11 different companies to secure the consumer’s business. 

How this impacts all agents

All agents — even those who do not buy leads from online aggregators — will be affected by the wave of new entrants.

As I mentioned earlier, the average consumer completes three lead forms. Although the consumer may have found you through your own marketing efforts or even a personal referral, he or she is comparing you against others. Today, you may be competing against two other Realtors, but in the near future you will compete against many more.

These new lead aggregators also hurt agents in their own marketing efforts. To explain why, we need to do a little math. For illustrative purposes, let’s say a typical Realtor would like to spend 20 percent of her net take-home on marketing, and based upon some averages and rounding, that correlates to $20 per lead. What many lead generators may do is sell the lead five times for $15, thus they earn $75 while it is only worth $20 to any one buyer. With that huge margin, these providers can bid higher on the search engines and pay more to other lead sources than any one individual company can. This is like going to the casinos where the house always wins.

How agents can win

Since you can’t beat the house, the best way to win is to beat the other players. That comes down to outperforming your peers on two metrics: speed and performance. Before you can do a better job servicing your clients, you have to get to them first. According to the California Association of Realtors:

  • 67 percent of Internet buyers selected their agent because he/she was the first to respond to their inquiry or was the most responsive.

  • 86 percent of Internet buyers said the agent’s response time was either “extremely important” or “very important” when they decided which agent to use.

  • 23 percent of Internet buyers expected their agent to respond instantly (compared with 0 percent expectation of traditional buyers). Forty-four percent of Internet buyers expect an agent to respond in 30 minutes (compared with 3 percent expectation of traditional buyers). Sixty-seven percent of Internet buyers expected their agent to respond within four hours.

Responding to a home buyer via a templated e-mail or a canned hard upsell is not effective. Your response has to be customized and fast. But this task can be daunting. The inherent nature of Internet leads makes it difficult because there is large volume and poor conversion. Our clients on average have a 2 percent close rate. Therefore, you should expect to be rejected 98 times out of 100 — and those ratios make it difficult to respond quickly. Successful real estate companies are either building call centers if they are large enough (a good example is Weichert Lead Network), hiring assistants or outsourcing to companies like ours. Doing it yourself will become even more difficult and frustrating as these new entrants increase the number of leads available (due to reselling) while driving down the overall quality of the leads.

Andrew Coleman is co-founder of LeadQual, a lead-qualification service that responds to its clients’ Internet leads within seconds and live-transfers only the qualified candidates.

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