Paying for leads as a main source for clients forces you to participate in a (very expensive, very competitive) frenzy. Even worse, it distracts you from spending time on the people you are most likely to convert into a sale.

Why?

1. You’re competing for a very narrow slice of the pie

Let’s look at the numbers. According to the National Association of Realtors (NAR):

“73% of buyers interviewed only one real estate agent during their home search.”

and

“77% of recent sellers contacted only one agent before finding the right agent they worked with to sell their home.”

 - Profile of Home Buyers and Sellers

This means that 3 out of every 4 potential buyers or sellers talk to just one Realtor. Previous NAR statistics estimated more than half only talked to one Realtor because they went with the agent recommended to them by friends and family.

Looking at this should make you question any overblown promises from lead generation sources. Based on these numbers you’re fighting with every other agent in your area for a chance to win the business of a small fraction of individuals that might be shopping around for a real estate agent.

 

2. You need a lot of up-front resources to make it work

We looked at commonly used real estate lead generation software, and found that on average individual agents will spend about $25,000 a year to receive buyer and seller leads. Many solutions on the market can cost an order of magnitude more that this.

Once you’ve purchased your real estate leads, you then need someone in your organization to sift through and assign them. Or as an independent agent you need to dedicate time to do this yourself. You can help this process by using automated e-mail drip campaigns to do the initial contact and pave the way for follow-ups, there is still a lot of manual effort involved here.

If you are a one or two agent real estate business you can find yourself being out-spent and out-maneuvered by bigger real estate companies that can afford to pay for more leads and have more agents making calls. In a situation where being the first to contact a potential buyer or seller is so important, individuals and small real estate brokerages are at a disadvantage.

Unless you pour a significant proportion of resources into this strategy, you’ll find that despite your hard work and follow-ups, your conversion rate on these leads isn't what you envisioned. It is certainly unlikely to match the promises you were sold when signing that contract to purchase leads.

 

3. You risk burnout 

Cold calling is a fact of life for any sales job. Unlike other sales jobs though, as a real estate agent you are still responsible for managing the other components of your business in addition to cold calling and follow-ups. Very few people can sustain doing this at a high volume over a longer time frame. This is a significant contributor to the amount of turnover we see for new agents. The mental and financial burden simply does not create an environment for thriving.

Thankfully, there’s another way.

 

What should you do instead?

The answer is relationship marketing. Focus on your sphere of influence. As a real estate agent, you are more than a salesperson. You are a member of your community, with rich connections. We’re not just saying that. A testament to this is the fact that real estate professionals are volunteering and making charity donations at higher rates now than in 2018. These connections and investments in the community you live and work in represent the people who know you and trust you. They are the ones most likely to take a chance on you. They are your sphere of influence.

Relationship marketing in real estate largely consists of doing the things you’re doing anyway: staying in touch with people and offering to be there for them, just in a more organized fashion. It relies on the fact that all individuals go through a home ownership cycle, including the people you know. At certain inflection points in people’s lives, they pretty reliably want to make changes to their living situation. Shifting focus from quantity of leads to the quality of your connections allows you to win their business.

By staying in touch with your past clients and primary, secondary, and tertiary connections, you likely know enough individuals at any given point in time that are needing the services of a real estate professional. The referrals from this group will be warmer, and you can cumulatively build a productive sales funnel over time without risking burnout.

The added benefit to this strategy is that as the industry sees disruption in the established way of doing things, your connection and investment in your sphere of influence will be something that cannot be automated away.

 

Why do my colleagues pay for leads anyway?

Paying for leads is worth the investment in certain situations. This will work for you if:

• You have a big budget to invest into purchasing leads.

• You benefit from brand recognition that can lead to a higher conversion rate than for others.

• You have exclusive deals that help you access higher quality leads.

• Others in your area under-utilize real estate lead generation tools, leading to greater conversion potential because of less competition.

• You’re using targeted advertising that double as brand-building strategies (such as traditional mailers to specific zip codes, Google, Instagram, Facebook, etc.).

There are a number of factors why despite its drawbacks this strategy can and does work for some people. This also brings us to our last point, which is that…

 

Your decision doesn’t have to be all-or-nothing

That’s a false dichotomy. You can still divide your time and budget between strategies. If you pay for lead generation right now, or are entertaining the idea, do the following to integrate the two methods:

1. Start by pivoting a proportion of your time to checking in with past clients. If you are a new agent, check in with those you know.
   

2. Update your real estate database with contact cards for individuals in your sphere of influence. Do you know when their birthdays, anniversaries, or home anniversaries are? Use your real estate CRM to remind you to send a card, note, or e-mail. These are a natural time to catch up and schedule a chat.
   

3. Time block an afternoon every week to systematically reach out to your sphere of influence in the same way you would cold call. Provide market updates, offer your services, and provide a listening ear.
   

4. Don’t dismiss people because they aren’t potential buyers and sellers right now. Add them to your contact management database and make an effort to stay in touch quarterly or annually.
   

Make relationship-based marketing an automatic part of your process. Look for a CRM with features that facilitate this. For instance RealOffice360 was purpose-built for relationship-based real estate businesses. Its client management, deal tracking, task management, and lead generation features work together to help you build a productive book of business and fulfilling real estate career for yourself.

Final Thoughts

Paying for lead generation as your primary source of clients involves playing a game where the odds are stacked against you. Your funnel is only as good as the money you spent that month and the number of calls you made. You’re at the mercy of industry disruption and other real estate businesses that can outspend you. Instead, focus on bringing your best to the people you already know. Leverage your relationships into a sustainable book of business with predictable sales, and a fulfilling real estate career.

RealOffice360 is built for agents wanting to get away from cold call grinding and build a fulfilling career instead. It is an unbelievably simple CRM, business tracker, and daily planner for real estate agents and Realtors®. Rather being just a data dump for client information, RealOffice360 helps you visually build your business plan, cultivate your real estate database towards your goals, and ultimately keeps you focused on what matters most: your clients and your deals. Get started for free - no credit card required!