The Real Estate Lead Gen Landscape Has Metamorphosed

Under all is the land. Yet outside forces are altering everything we stand on and all we can see—even beyond the horizon. This is a truly remarkable time to be in real estate because, in changing times, there will be huge winners. In the past, we've seen that those winners pivot quickly and appropriately—months ahead of their competitors.

Real estate teams that are crushing it in this current market are currently cheating the system. They are utilizing an old-school strategy combined with today’s artificial intelligence to dominate the competition. In most states, 50% of agents didn't do a transaction in 2023, and those that did multiple transactions outside of their referrals are frequently stuck on a hamster wheel. They buy leads, invest in working them, close a small subset, and then repeat. Month after month, this continues as they run in place, not being able to escape the hamster wheel or plan an exit.

 But this is still not the bulk of transactions. The bulk of transactions are with a select few that dominate.

The One-Two Two Punch

With the one-two punch of the DOJ/NAR diminishing the value of seller leads and the SEC ruling to reduce spam leads to be sold 1:1 rather than one-to-many, the lead landscape has shifted dramatically in 2024.

-DOJ/NAR - Much has been written about this situation, but the consensus seems to be that working buyer leads will require a workaround, making it more difficult to ensure compensation. This will take a while to shake out, so from this standpoint, buyer leads are a bit risky currently while all of them sit in purgatory. 

-SEC & Spam - The government wants to reduce spam, and I’m a big fan of this in theory as a consumer.

TLDR: Leads may not be bulk sold going forward. They must be sold 1:1. As an example: if Bob the Buyer clicked on a Zillow listing and requested more information, that lead would be sent out to more than one Realtor. Sometimes more than 20 real estate agents. (see also mortgage and title, etc.) However, now - they can only sell a lead to one person, so they will inevitably raise the price of that one lead to compensate for the lost revenue from the 19 others.

What was an almost “even” playing field in 2023 will soon be forgotten. The metamorphosis of the rules is ongoing. Yet we can already see that seller leads have won the evolutionary battles, now stand as a far superior lead option, and will become more valuable going forward.

 The Cheat Code

Many nerds will remember the cheat codes for early video games. They opened up invincibility, extra or unlimited lives, or cool new tools and levels. Learning the recipe for a cheat code was awe inspiring. Implementing the cheat code instantly transformed you, leveling you up on another tier.

In real estate, the secret you already know to be true is that buying is better than renting. The top teams that are crushing it know this and use this cheat code. They get off the hamster wheel (or significantly reduce their spending) by renting leads. To make up for it, they own their own database. Owning is better than renting. They leverage the data they own (their databases) to find sellers in their own geography.

The Success Formula

-Detox your data (remove duplicates, Bart Simpson, and other realtors) -Repair and append your database (fill in the blanks).

-Buy a Geo Farm (must have name, phone number, email, and physical address).

-Market to this list for 6 months (offers of value: Invitations to events, neighborhood market stats, relevant seasonal content, and eventually a CMA).

-Slowly reduce your lead-gen rental budget. 

This is neither easy nor quick to do on your own, but highly effective in the long term. The upfront time cost is offset by reduced spend on leads in the future. I know many people have paid a VA to do data cleaning and data entry very successfully. Again, cutting off lead buying cold turkey is not the recommended strategy, but rather ease off the throttle as your new self-generated leads begin to flow over time.

Transactions are Actually Abundant

I've looked at hundreds of realtor databases over the past quarter. The best closing ratio I've seen is 11% inside a database. For example, 89% of the transactions in a database were with another agent. This is millions of dollars of sell-side commissions lost to the competition. You don't need more data; you need to focus on those people who are in your own database. And the lead providers continue to raise the percentage/fees they charge.