Kris Lindahl’s recent article on why buying leads isn’t a healthy way to build your business highlighted the bifurcation in the industry between those agents who do buy and work online leads versus those who do not. I’ve been in the real estate business for over 20 years and have seen the pendulum swing from one extreme to the other.
When I got in it, I was taught to build relationships and do circle prospecting around a new listing. We used the old reverse telephone directories to call and mail to neighbors, and faithfully held open houses. It worked in the year 2000.
The rise of the platforms
Then, Zillow and Trulia and realtor.com and a boatload of other websites came into the picture, and started selling us ZIP codes and “hot” buyer and seller leads. Many agents bought into the pay-to-play system and got hooked on this method of lead generation.
We learned how to work these newfangled leads. (Speed to lead! Grab that phone, and return all calls within five minutes or risk losing the lead). And for a while it worked. I opened my own brokerage in 2007, and built it up by buying leads for the entire office and training my agents how to work the internet leads effectively.
While I heard some complaining about how these types of leads were useless or poor quality, I found that not to be true. Internet leads were just different — and it took a different skill set (and patience) to work a Zillow or realtor.com buyer than it did to work with someone who was referred to you by a past client.
In general, internet-generated leads are higher up in the funnel — and take time, patience and hand-holding to get them to close. It’s not unusual to close buyers 10 or 12 months after they first come into the platform. But for many years, that’s what we did, and from 2007 to 2018 our office had a very nice return on investment (ROI) from our monthly ad spend.
Speed to lead
Then, in 2018 something shifted, and I noticed that we were spending more and more on the ZIP code buys, and conversion numbers were shrinking. Just a little. This accelerated in 2019 and 2020, while at the same time, one of our support advisers at a portal we use advised us to stop qualifying our buyers over the phone.
“Speed to lead” had shifted from speed to answering the phone or returning that call to speed to getting them face to face on a showing appointment.
This tactic wasn’t going to work in our office. We are in a small rural area that attracts big-city investors and buyers from two to three hours away with cash to buy rental units. We discuss with the callers where we are located (physically, distance from them) and are they familiar with our area at all prior to making an appointment.
We ask if they are working with another agent to avoid stepping on another agent’s toes. We discuss the steps to starting the buying process, and ask if they need help with financing. We ask questions about their needs and wants, so we can narrow down the search and get to know them a little over the phone.
We do this prior to making the appointment. We are qualifying the buyers and also educating them as to the next steps to homeownership so everyone is on the same page.
We do this to avoid someone driving three hours to look at a house in the northern part of our county only to say, “Oh, I didn’t realize it was so out in the country!” We do it because our sellers expect us to bring qualified buyers inside their homes (especially during COVID-19).
And we do it to educate and prepare the buyers about how the homebuying process works, and what steps they’ll need to take to get into a home they like.
With today’s lack of inventory and multiple-offer situations, we have less time than ever to show a few houses, make a decision and get financing lined up. Everything is happening within a compressed time schedule.
On the one hand, internet buyers who are spoiled by 24-hour delivery services want and need quick and efficient service. On the other hand, buying a property is not the same as ordering a pair of shoes that can be easily returned by UPS.
Yes, we need to offer fast service and jump to grab the phone or risk losing it. But no, we don’t need to agree to meet a stranger at a property with 20 minutes notice — and with little or no idea who this person is.
All real estate is local. It may work in some areas, but in my part of rural America, it’s just not practical. Besides, by the time we get to the house in today’s hot market, it may already be under contract (even though it’s still showing on all the search sites as active).
Pulling back to the brand
Once I realized that the playing field was shifting — that incoming leads seemed to be less and less suited to our office and how we handle the process and that the buyers calling in seemed to be of a lower quality and harder to convert — we shifted our marketing approach.
In 2020, we revamped everything, and took the online portal buys down to almost zero. Almost. I still believe you need multiple lead-gen sources, and so we’ll keep a minor buy in the internet leads, but it really has been cut to less than 10 percent of the spend we did in 2018 and 2019.
With the newly freed-up budget, we diversified our spending into three categories: community building, online marketing (generated from our own platform), and print/direct mail.
We have always had a “We’re Local. We’re Global” marketing tagline as we are members of LeadingRE. We are the No. 1 independent company in our area, and this has helped us compete head to head with franchise companies. We have a strong presence in our chamber of commerce, and many of our agents volunteer throughout the community.
We allocated part of our budget to support nonprofit groups in our area. We are sponsoring a dog adoption monthly for an animal rescue this year. One of our agents recently spearheaded a fundraising campaign for a children’s educational workshop in her town. She started by donating $500 and created a “match my donation” effort that spiraled into $5,000 overnight using social media.
While we don’t expect people to buy or sell with us solely due to our donations or fundraising efforts, our activities have not gone unnoticed. At a listing appointment recently, a person referred to us by a friend commented on our presence in the community and specifically said we are doing “good things” for the town. It’s a win-win.
We always had a strong email list of past clients and leads from our online sources. Admittedly, our marketing to that list was always sporadic. We’d send out a few monthly newsletters or updates, then nothing for months. This seemed to fall by the wayside the busier the office became.
Now, it’s a concerted effort. I paid upfront for 12 months of “constant contact,” which means if I don’t use it, I’m wasting money as it’s prepaid. Use it or lose it. Suddenly I’m using it. Imagine that.
We are doing two emails a month: a monthly update and a market statistics update. I may expand it to include just listed/just sold, but I don’t want to bombard them with too much information. Right now, it’s working.
Although some always unsubscribe, we have a healthy growth rate and a 15 to 20 percent open rate on a mailing list of thousands. Every time it hits, we get a few stragglers who email from the blue asking a real estate question or raising their hand for help.
The biggest spend we have right now is our EDDM (every door direct marketing) through the USPS. We send a monthly postcard to two large farm areas — one immediately around our office (3900 addresses) and one in a town where we have a strong presence and market share (5000 addresses).
We mailed the same oversize postcard once a month for four months to hammer our message in: We are your neighbors. We are your local experts. It’s working.
For the same dollar spend that we used to allocate to online leads, we have created a strong presence in our community, and clawed back market share from larger companies and franchises. Our brand has demonstrated we don’t need to buy leads to dominate a territory.
Knowing your numbers
What you do need is to know your numbers: Where are your leads coming from? What is your conversion rate? What is your return on every single channel where you spend money?
If you’re looking to wean yourself off paying for leads, start there. Painstakingly track each closing you had in 2019-2021. Where did each closing come from? How much was your take home (company dollar if you’re a broker or GCI if you’re an agent) from each closing and then what did you spend to buy leads from that source?
Once you know your numbers, you’ll be able to track over time if the lead source is still a winning program, or if the quality of the lead drops over time (as I noticed). Keep putting money into platforms with a positive ROI — not ones that lose you money.