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The Truth About Buying Online Real Estate Leads

Have you ever paid for real estate leads?

Or, to phrase it another way, have you ever advertised on Zillow, Trulia, or Realtor.com? Have you ever run a pay-per-click (PPC) campaign through Google AdWords or Bing Ads?

Whether you’re new to the real estate biz or a seasoned veteran, we now have statistics that show the effectiveness of purchased real estate leads. And statistics don’t lie, so get ready to learn the truth about buying real estate leads.

New statistics on lead sources

Recent reports (20162017) released by the National Association of REALTORS say 64% of sellers found their agent through a referral and 25% used the agent they had previously worked with to buy or sell a home. That means 89% of transactions are repeat and referral deals.

This tells us that 11% of all other deals done come from all of those other sources—direct mail, sign calls, door knocking, cold calling, expired listings, walk ins...and web leads. So we can safely deduce that web leads account for less than 11% of completed real estate transactions.

So what does this all mean?

These statistics tell you how you can most effectively prioritize your activities to generate the most business. There are two key takeaways here:

  • Focus first on generating referrals and repeat business. Dedicate 80-90% of your time and energy on staying in touch with past clients and nurturing those relationships.
  • Purchasing new leads (and even generating leads organically) should be further down on your list of priorities. Cut back to spending just 5% of your resources on obtaining new leads.

Statistics paint a pretty clear picture. But to get an even deeper understanding of why web leads aren’t as valuable as past clients, let’s take a look at the different types of online leads and their pros and cons.

Types of Web Leads

100% Purchased Leads: Leads generated by placing an ad on a home search site like Zillow, Trulia, or Realtor.com.

  • Pros: Almost no setup on your part; potential to start generating leads immediately
  • Cons: Rented audience (you’re only in front of them for as long as you’re paying); expensive; must submit to their rules and limitations

Paid Self-Generated Leads: Leads obtained by advertising in search engines (e.g. Google AdWords) or on social media (e.g. Facebook Ads, LinkedIn Ads).

  • Pros: Some creative freedom; less expensive than 100% purchased leads
  • Cons: Rented audience; must submit to their rules and limitations; requires knowledge of the latest best practices

Organic Self-Generated Leads: Leads earned through content marketing (for example, writing a blog post, optimizing it with keywords so it gets found on Google, and including some sort of call-to-action in the blog that encourages readers to get in touch with you).

  • Pros: Although moderately expensive to start, becomes less expensive and more sustainable in the long run
  • Cons: Shared audience (competing with other agents for attention in search engines and on social media); requires a lot of time and energy to create content and stay on top of best practices

Now that we’ve gone through the different types of online leads, compare those with what I like to call your 100% Owned Leads:

100% Owned Leads: Leads who are already in your database; the people with whom you already have a relationship.

  • Pros: Most sustainable long-term (becomes less expensive over time); timeless strategies work best, so it’s easy to keep up; people who already know, like, and trust you are more likely to convert to repeat or referral business
  • Cons: Requires a lot of time and energy to build relationships

It’s clear that these 100% owned leads—your past clients and existing relationships—should be getting the majority of your attention. However, it seems that many agents are still putting way too much time, money, and effort into web leads...and neglecting their past clients.

According to NAR, 70% of sellers say they would definitely recommend their agent for future services...but only 25% actually do use the same agent the next time they sell their home. Agents are losing clients. Somewhere between closing and the next time they’re ready to sell, these past clients are getting picked up by other agents.

Now that you know the truth about buying web leads...

...don’t let online lead generation distract you from what's most important—staying in touch with your past clients. Focus first on repeat business, second on referrals. Web leads should fall into your strategy somewhere further down the line.

Online lead generation can be a great supplemental strategy. You just need to adjust how much time and budget you’re devoting to it. Knock it down to 5%. And when you're setting your goals and forecasting how many deals you'll earn, remember that the average web lead conversion rate for the real estate industry is 0.5-1% (lead to closings).

Once you’ve balanced your strategy, you can feel good about having a small web leads campaign running in the background while you put the majority of your time, effort, and budget (and heart and soul) into nurturing your existing relationships.

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