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Ask a coach: Do I need to pay for real estate leads?

There is no doubt that lead generation programs are big money makers — for those selling those leads to agents, or for brokerages getting agents to come to them with a promise of leads. 

In my opinion, they are huge money- and time-suckers for agents, however. I believe Steve Murray (senior advisor to RealTrends) once wrote about how agents are paying on average from these sources of over $3,300 per closed lead. That’s not the worst of it.

The worst of it is this: Agents say that these leads covert 1% to 4% of the time. That means for every 100 leads an agent follows up with and nurtures, only one to four of them end a closed deal.  So, they wasted their time on 96 to 99 people.

Who do buyers and sellers work with?

The National Association of Realtors shows clearly every year in their studies that the vast majority of sellers and buyers (well over 80% every year, sometimes closer to 90%) work with one of these types of agents:

  • Someone they know personally.
  • Someone they did business with before (same as above).
  • Someone they were referred to by someone they know. 
  • Someone they met from a sign call or open house. 

So, very few buyers and sellers come from lead generation programs, and I don’t see that changing. It’s not hard to generate a lead — companies can generate leads all day long with their artificial intelligence.

But, while people will get their information from anyone, they do business nearly 90% of the time with someone the know. Consumers are getting smarter and more cautious about putting real information down to trade for a piece of information. Meaning that the “leads” generated are of poorer and poorer quality (fake names and temporary email accounts) than ever before.

What is the solution?

Cultivate relationships with enough genuine raving fans of your work that they refer you others and do enough repeat business to meet your goals. 

I know several agents with no more than 161 VIPs generating as many as 90 transactions a year, and not buying any leads nor are they mass marketing to anyone. That’s over a 50% return vs 1% to 4%. These agents simply create and follow a plan with a small group of great people and reap the rewards.

Yes, they do some open houses, get sign calls and some agent-to-agent referrals, as well. But most of the business comes from that small, carefully selected VIP list. 

I did some research and discovered something called Dunbars Number, that says people can only maintain relationships with up to 150 people max.

It’s not a coincidence that so many agents, when asked to go through a list of thousands of people in their databases, and only pick ones that fit their self-identified minimum standards and are people they genuinely like and would love to do business with or receive recommendations from — somewhere in the range of 100-161.  Our brains demand a number around that.

The thought that we need to market to thousands of people to meet our goals is not true. I’m working with a small group of agents to test this from ground up with a Mastermind Group/

  • 150 of the right people. (Or less)
  • Choosing just a few of 150 possible things to do with them.
  • Working it 150 days a year.

Here’s how it works. Try this.

1. Identify what you want from your work both income- and time-wise. 

2. Determine your minimum standards regarding area, price range, average income per closing, type of property, etc.

3. Go through the lists you have now to start a group of VIPs – no more than about 150, but enough that you can reasonably expect to meet your goal. For example, I have a coaching client whose average price is close to $1 million and she only keeps about 80 people in her VIPs because she doesn’t want, or need, to do a lot of transactions. She’d rather spend more time with her grandchildren and her hobbies.

4. Now that you have the right people who fit your goals, the next step is to create a plan to create relationships that cause them to know, like, and trust you so much that they will recommend you to others.

5. Finally, create a calendar that supports the actions in your plan. We believe you can do it in no more than 150 days a year.

To answer your question: I’m not a fan of buying leads that suck you dry both cost-wise and worse time-wise.

Donna Stott is a real estate consultant focusing on agent and brokerage business.

This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.

To contact the author of this story:
Donna Stott at donna.stott@mac.com

To contact the editor responsible for this story:
Tracey Velt at tvelt@realtrends.com

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