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REAL ESTATE NEWS |
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TECHNOLOGY |
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GENERAL
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| This article was published on: 02/01/2004
COVER FEATURE: Internet Lead Generation
How real is that lead?
The lead's the thing
Sea change or ripple?
Caveat emptor
Making it work
BY MARIWYN EVANS
"I get 70 percent of my business from some form of
Internet lead. People at the office used to think I was wasting my
time, but not anymore."
—Bridget Sturm, associate, Realty Executives, REALTORS®, Vista, Calif.
"As far I can tell, these Internet lead companies
just want me to pay a lot of money for referring my clients to me. I've
tried several, and I still get several pitches every day. But now I
treat them like the spam they are."
—Ken DuVall, broker-owner, Ken DuVall & Associates, Chico, Calif.
How real is that lead?
Love 'em or hate 'em, companies
that connect Internet consumers with sales associates are now a part of
your business reality. Whether their business model is selling leads or
providing a conduit for practitioners to pitch their services to
consumers, these companies have leveraged the power of the Internet to
create new forms of real estate marketing. Typically, the companies
obtain consumer leads through some combination of advertising and
buying high placement in search engines.
Although Internet lead generation is a
relatively new concept, it's not unique to the real estate business.
"It's being used in other industries—from banks to the medical
profession," says Scott Hileman, national director of real estate
business transformation for Ernst & Young in New York City. In
addition, relocation and practitioner-to-practitioner referrals are
already commonplace in real estate.
How you feel about Internet lead
generation will depend a lot on your own strategies for finding new
customers and your comfort level with technology. If some practitioners
see Internet leads as the next big thing, others voice opposition to
what they see as the appropriation of their hard-won customers.
"Internet lead companies use our listings
and market information, then sell them back to us as leads. It's
abusive to have to pay out referral fees in a day when our expenses
have gone up," says Bill Hoyle, Realty Executives West Coast in Punta
Gorda, Fla.
Although he received some viable
residential customers using HomeGain, he's generally frustrated by the
"bad phone numbers and unqualified buyers" he's received from Buyers
USA and ServiceMagic. Now he's decided the best business strategy is to
compete directly with Internet lead sources. Hoyle is developing five
different sites, including www.accordingtohoyle.com
where prospects can obtain home valuations, sell household items, and
get area news. Then, he says, he can personally nurture his contacts
and build the loyalty that's more difficult to secure with referral
leads.
The lead's the thing
For practitioners who've tried and
rejected Internet referrals, there's no doubt that the most critical
issue is the quality of the leads. Dana Sabonjian, a sales associate
with Century 21 United II in Grayslake, Ill., decided to try both
HouseValues and ServiceMagic. "I love the computer, and I'm not afraid
of it, so when I changed offices, I wanted to try a new approach," she
recalls. But after submitting "nearly 1,000 proposals" to Internet
leads in six months, Sabonjian has made only one sale. "Most of the
leads just wanted a free CMA to decide if they should refinance," she
says. Even worse were clearly bogus leads that weren't culled before
she paid for them. "I got leads who told me they wanted a $1 million
home but wouldn't give a phone number."
Screening out buyers who aren't serious is
the "biggest challenge for us," acknowledges Bradley Inman, founder and
CEO of HomeGain in Emeryville, Calif. The 15 data fields on the
company's registration form eliminate a lot of Internet Looky Lous,
says Inman. "But does that mean that everyone is a real buyer? No, no
more than all the traffic walking into an open house does."
All the Internet companies REALTOR®
Magazine talked to said they made some efforts to screen their leads.
LendingTree uses "proprietary filtering software" to rout out
unqualified Internet customers, says Senior Vice President and Manager
of Realty Services Eric Cunliffe. AgentConnect uses a combination of
filtering software and manual verifications of phone numbers to screen
its leads, says Payam Zamani, CEO of AgentConnect's parent company,
Next Phase Media Inc.
Even those who regularly use Internet
leads estimate that only one in 10 is a winner. "Either the lead is
really good, or the person never calls you back," says Kurt Thompson,
broker-owner of Argyle Real Estate Group LLC in Fitchburg, Mass. Still,
in the last two months, he's received two buyer clients from among 10
leads he's accepted from ServiceMagic.
"There's a misconception about the quality
of leads from the Internet," says Anthony Marguleas, broker-owner of
Amalfi Estates Inc. in Pacific Palisades and Pasadena, Calif. "People get
five leads and think that if two of them aren't good, there's something
wrong. You have to take a proactive approach and work the leads." To
ensure an initial response in 10 minutes to the 10,000 Internet leads a
year he gets from HomeGain.com, HouseHunt.com, and his own Web site, (www.amrealtyla.com),
he and his 10 sales associates use two virtual assistants to enter each
prospect into a biweekly e-mail marketing campaign. The e-campaign also
directs prospects to the company's virtual office Web site so that they
can preview homes and learn more about the area.
Marguleas, whose company spends about
$75,000 a year on Internet marketing, says A.M. closed approximately
$50 million in sales volume in 2003, about half of it from the
Internet. His overall conversion rate for Internet leads is probably
about 1 percent. HomeGain leads yield a higher conversion rate because
of greater prescreening, he says. Of these serious buyers,
approximately one-third want to hire a salesperson immediately and
often buy a home in a few weeks, says Marguleas. Another third will be
ready to act in the next six to 12 months.
The fact that Internet buyers visit multiple sites in their home searches (an average of 4.17 sites, according to the 2003 Internet Versus Traditional Buyers Study
conducted by the CALIFORNIA ASSOCIATION OF REALTORS®) creates some
confusion about whose lead it really is and who should be compensated.
"I've bought a lead, then instantly recognized the name as someone who
had just listed a house with another practitioner I know," says Vicki
Viers, ABR®, e-pro, of RE/MAX Properties of the Valley in Parkersburg,
W. Va., who has used ServiceMagic and RealtyNow. "I've also received
the same lead from more than one company."
Although newer sales associates without a
referral base might seem the best candidates for online lead referrals,
12-year real estate veteran and Century 21 Double Centurion Derek Kirk
of Century 21 Haley & Associates in Elk Grove, Calif., says he saw
"a huge benefit right away" when he started using HomeGain three years
ago. "I'm not hampered with the need to cold call (now mostly
prohibited by federal do-not-call regulations). Instead I get warm
leads from the Internet." He's also found his marketing costs dropped
by 10 percent to 15 percent.
Kirk, who focuses on seller leads,
estimates that he receives responses on about 15 percent of the
proposals he submits and attributes his high success rate to the amount
of personalization he adds to every response. He asks about house
condition, upgrades, and what the sellers' situation is. He tries to
increase the personal touch by calling prospects first, "unless the
phone number is bad," then sending an e-mail about his services.
"If I can get the phone number and a
face-to-face meeting, I can usually get the listing," agrees Kellie
Jones, CRS®, GRI, a broker-associate with Century 21 Superstars in
Rancho Santa Margarita, Calif. Jones does about half her business
through Internet referrals from HouseValues; her ZIP code exclusive
with HomeGain; and her own site, www.kelliejones.com.
But if there's one consistent factor among
practitioners who've tried Internet leads, it's that there is no
consistent factor. Take Cynthia Sweet, ABR®, GRI,
a sales associate with RE/MAX Excalibur in Scottsdale, Ariz. As a
former software consultant and manager, Sweet saw Internet-based
prospecting as the ideal way to build a business when she entered real
estate two-and-one-half years ago. Instead, she found that "you're at
the mercy of whatever information they give you. You create the
proposal blind."
For instance, says Sweet, when she tried
to conduct a CMA for a lead she'd received from HomeGain, the location
of the house was defined only within a one-half-mile radius. "In my
market, that area can encompass homes worth $300,000 to $1 million.
There was no way to provide meaningful information. And there was no
feedback [from leads] to gauge why they didn't respond."
Although she has several Web sites and
views the Internet as a great tool for serving clients, Sweet has had
enough of Internet referral leads. Instead, she says, she'll cultivate
business through face-to-face contacts and personal referrals.
Sea change or ripple?
How, or whether, the current crop of
Internet lead-generation sites will ultimately affect the way
practitioners relate to clients is far from certain. Internet referrals
are "part and parcel of the critical changes that technology has had on
real estate as an information business," says John Tuccillo of
consulting company JTA Inc. in Arlington, Va. But the actual impact of
Internet referrals on the real estate business probably won't be
dramatic. "At the end of the day, it's relationships that drive real
estate, and you don't achieve that through a piece of technology," says
E&Y's Hileman.
Caveat emptor
Keep these questions in mind before you sign on the dotted line. - Who owns the leads?
Check on who keeps the leads if you cancel or whether you owe a
referral fee on a second sale on the same lead made years later.
- How long is your commitment? Can you cancel at any time, or do you have to sign a longer-term contract?
- How many real estate practitioners receive each lead? If you're scrambling against a sea of competitors, are you really achieving any marketing benefits?
- What are your options if you have a problem? If you already had a lead or received it through another source as well, do you still have to pay?
- What's the average conversion rate? Ask about company ratios of leads to appointments and of appointments to sales.
Making it work
Ready to give referral leads a try? Follow these tips from practitioners who've been successful. - Monitor your responses carefully. Track how many calls you get and the outcome of the calls. It's all theory until the market responds.—Maureen Morell, RE/MAX 200 Realty, Winter Park, Fla.
- Give them something before you call. I immediately push listing information via e-mail to my buyer prospects, then follow up an hour later with a phone call.—Kurt Thompson, Argyle Real Estate Group LLC, Fitchburg, Mass.
- Get control of the [Internet] space, either by working with a site that gives you a geographic exclusive or by paying to come up high in search engines.—Anthony Marguleas, Amalfi Estates Inc., Pacific Palisades and Pasadena, Calif.
- Be the first into the deal.
Unlike traditional listings where you want to be the last person the
client talks to, there seems to be an advantage to being the first to
make contact with an Internet prospect.—Bradley Inman, CEO, HomeGain, Emeryville, Calif.
Business models in brief
A few major players in online buyer and seller referrals
IN BUSINESS SINCE | VISITORS | REAL ESTATE PARTICIPANTS | CONSUMERS SERVED | EACH LEAD GOES TO | REVENUE
MODEL |
AGENTCONNECT.COM/REALTYNOW.COM
With RealtyNow, registered
consumers' contact information is sent to registered salespeople in the
same geographic area. With AgentConnect, practitioners determine how
many leads they want a month from a specific ZIP code. Practitioners
can accept or reject leads. |
2002 | 2 million users registered1 | 7,000
salespeople. Practitioners must be licensed for six months, have lived
or worked in an area for three years, and have at least one or two
verifiable transactions. | Buyers or sellers | Up to three practitioners | Pay on receipt of lead—$29.95 per lead |
HOMEGAIN ( www.homegain.com
With Agent Evaluator, you submit
anonymous proposals to buyers and sellers, who then can choose to
contact you. Other options: Home Price Express, offering free mini-CMAs
from salespeople, and BuyerLink, linking prospects' online searches to
an associate's site in a specific geographic area. Participants provide
consumers with information on experience, education, and business
history of sales through Home Gain. |
1999 | More than 2 million unique visitors per month | 68,000 registered salespeople; about 20,000 active in the system. Practitioners must be licensed. | Buyers and sellers seeking real estate practitioners | Up to six practitioners | Agent
Evaluator and Home Price Express: monthly fee, plus portion of
commission (about 25 percent) due at close of sale; BuyerLink is
pay-per-consumer/visitor. |
HOUSEVALUES ( www.housevalues.com
Listing lead sent to one
practitioner, who has exclusively contracted for that geographic area.
Market Leader lead-management software, coaching, and training included
in subscription price. |
1999 | 1 million consumers requested information in 2003 | 7,000 salespeople.
Practitioners must be licensed. | Sellers seeking value estimates for their homes | Up to one practitioner per geographic area | Flat subscription fee for each geographic area; varies according to size and population density |
LENDINGTREE ( www.lendingtree.com
Companies—usually relocation departments—receive lead information, which is then passed on to associates. |
1998 | More than
2.2 million unique visitors per month | 660
brokerages representing 10,000 salespeople nationwide. Companies must
be well-established and prominent in their market and use only
REALTORS® to service leads. | Buyers and sellers, who compare mortgages and real estate companies | Up to four practitioners | Portion of commission
(up to 30 percent)
due at close of sale |
SERVICEMAGIC( www.servicemagic.com
Registered consumers' contact information is sent to registered practitioners in the closest ZIP codes. |
19992 | 3 million visitors providing 100,000 leads a month3 | 22,000
salespeople and brokers. Practitioners must be licensed, have no record
of judgments against them, and not have declared bankruptcy for seven
years. | Buyers seeking salesperson, lender, or home improvement provider | Up to three practitioners for real estate leads | Pay
on receipt of lead—$30 for buyer lead, $40 for seller lead, $60 for
combo buyer and seller lead, $75 for exclusive CMA lead (CMA leads sold
to one salesperson only). |
1 For both real estate and auto searches.
2 Real estate leads since 2002.
3 For both real estate and home improvement services.
Information was provided
by the companies. NAR doesn't evaluate or endorse these services and
isn't responsible for changes in company info.
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