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Are Real Estate Lead Generation Companies Worth the Spend?


This may be one of the most asked questions we hear real estate professionals asking throughout the industry. Is paying for leads worth it? To answer this question, we must first define a “lead.” For the purposes of this conversation, we will simply define a “lead” as a person who may want to buy or sell real estate in the future.

As we dive into this question deeper, we need to understand why a real estate professional would want to pay for leads (information for a person who may want to buy or sell real estate in the future). As you build your real estate machine, momentum is one of the most important aspects of a successful business. Momentum can be simply described as speaking to lots of people every week about real estate. This is a very simplistic approach but if we are connecting with people every day of every week, eventually we will find someone who wants to buy or sell real estate. This thought process is where lead generation was born and explains why successful real estate professionals are always hungry for more conversations. The more conversations you have, the more business is generated. As these successful professionals ran out of conversations from their sphere of influence (the people they already know), they began looking outside their sphere to find more conversations.

As lead generation developed over the last few years, technology companies got better at analyzing the data and categorizing leads. These companies are able to track people online and grade them as to how likely they would buy or sell real estate. They realized they could sell a person’s information at a higher price if they were actively looking to buy homes compared to someone who may have looked at one home a month ago. More companies saw an opportunity to analyze people's online behavior and sell their contact information to real estate professionals.

This has become a billion-dollar business and we are at the heart of it. Have you looked at your LinkedIn Inbox lately? I am not sure about you but I receive dozens of messages a month advertising “Ten leads a week,” or asking me if I’m “Interested in meeting 20 new leads per month?” The question we are asking is, are paid leads worth the spend? The answer has to come from within. What are your business needs? It is my opinion that paying for leads is a long-term approach. Many real estate professionals are looking for a quick fix and a fast close. They’re hoping that paying for “leads” will help them find a person who wants to buy tomorrow. The fact of the matter is that those leads are very expensive and are probably being snatched up by large teams spending tens of thousands of dollars each month on paid lead generation. Those teams spend upwards of $20,000 per month with Zillow or Realtor.com and yes, they are finding people who want to buy in the next month. If you are not part of a team spending that kind of money, how can paid lead generation benefit you?

Let’s go back to the idea of momentum. How many people are you talking to each week, each month? If we look at paid lead generation as a long-term commitment, a way to build momentum in our business, then paid lead generation may be worth the investment. Let’s look at the numbers. If you join a program that costs $250 per month, you will spend $3,000 per year on lead generation. Let’s say you receive information from two people per month or twenty-four names over the year. You nurture that information, and one person from the twenty-four agrees to have you do a CMA (market analysis on their home). They decide to list with you for $500,000 and you could make an estimated commission of $15,000. That is a 3 times return on your investment.

If your mindset is, “I want to fill my database with as many human beings as possible, follow up, provide value and be the best Realtor they come in contact with so someday in the future they use me,” then the marketing spend may be worth every penny. There are hundreds, maybe thousands of lead generation companies out there. Make sure you investigate the companies you are looking at. Some good questions to ask:

Where are you getting the data? How do you assure the data is up to date? Will you guarantee the leads? How many Realtors in my geographic area are also getting these leads? What type of information will I receive? Name, phone, address, email, etc... How will the leads be delivered? Email, text, interface with my CRM, etc.

In the end, the question remains, is paid lead generation worth the investment? This really comes down to your mindset and execution. I love the idea of being fed people’s information and getting the chance to prove that I am more valuable than any other real estate professional they may come in contact with. The hard part is the execution, the conversations, the value ad, the consistency, and the patience.