The Lead Generation Shootout (Part 1 of 2) 

by Bernice Ross, Ph.D. MCC
Owner, Teleclass4U.com, LLC and RealEstateCoach.com

Copyright © 2007
RealEstateCoach.com and Teleclass4U.com
All rights reserved in all media.

Real estate is being transformed by changes so profound that it may literally rip the industry apart. If you’re still hanging on to 20th Century prospecting and by referral techniques as the only tools in your lead generation toolbox, you may be washes out of the business if you are unwilling to address the waves of change. 

The rate of change in our industry is staggering, yet it doesn’t begin to approach what is coming. The riptide of change threatens to put you out of business if you are unprepared. This will be especially true for older agents who still struggle to answer email, who have never sent a text message, or who have never played an on-line game. 

The Lead Generation Shootout
If you’re wondering why your phone is not ringing, why your print advertising seems to have a decreasing rate of return, or why your referrals have dried up, the explanation is simple. Many of your lead resources have moved on-line. It seems that a battle is shaping up among the titans in the industry. When Prudential kicked Zillow and Trulia out of their conference, one has to wonder whether the folks at Yahoo! did some arm twisting.

Not only are the major search engines vying with each other, however, companies such as HomeGain, HouseValues, and Zillow are competing with major real estate companies in a battle to capture more web visitors. The primary goal is to either generate referral fees and/or advertising revenues.   

At the recent Really Awesome Women in Real Estate Conference, Andrew Coleman of LeadQual.com and Brendan King of Point2Agent.com had a spirited discussion about how lead generation will occur in the future. Coleman argued that if you’re not spending at least $2000 per month in pay-per-click advertising, either as a broker or an agent, you will be better off buying leads from companies such as HomeGain that have the wherewithal to generate top search engine placement and deliver leads in real time.  

In contrast, King argued that consumers prefer to deal directly with the listing agent rather than being referred to an intermediary. King’s position was that sites such as point2 that syndicate their member’s listing advertisements to multiple sites is a much more viable model since their model sends the consumer back to the listing agent.  

This seems to fit with Google’s business model as well. I recently spoke with Justin McCarthy who told me that Google’s goal was to put people who use their search engine in touch with the best source of information for a given search. When Google fails to do this, their users do not complain to the people who received the lead—they gripe at Google. From an industry perspective, the best person to handle this lead is the listing agent—not those who paying to receive leads from other agents’ listings.  

The On-line Price Evaluation War
A different battle is also emerging on the on-line property evaluation front. Zillow has forced industry sources to provide comparable sales information. Shame on Zillow, however, for not doing a better job on their algorithms. Any novice real estate broker knows that you do not comp a 3500 square foot property with a 1500 square foot property in a zip code five miles away from the subject property. Even after repeatedly entering updated information on my own house on Zillow, the results continue to be off by almost 20 percent from where I just sold my property. The changes I made to the bedroom-bath count on repeated occasions, never showed up on the Zillow site. The same problem occurred with my property in California. The challenge is that they are not pulling comparable sale information from my subdivision nor are they using comparable sales that even remotely resemble either of my properties.  

Coldwell Banker has implemented their own on-line evaluation tool in response to Zillow. Their site could not divulge sales prices because Texas is a non-disclosure state. Their comparable sales data was accurate for my California property, even though they gave me a $600,000 range in terms of the price. At least Coldwell Banker is in the game and doing a better job in providing accurate comparable sales as compared to non-brokerage competitors such as Zillow.  

Realtor.com had accurate comparable sales, but their sales data were over six months old. It’s puzzling that Realtor.com can make disclosures that Coldwell Banker is prohibited from doing so in Texas.  

Surprisingly, www.Moveup.com continues to be the most accurate in terms of the properties that I have checked over the last 18 months. Although they could not provide sales data for Texas, they did hit my California property value exactly where the comparable sales data suggested.  

The challenge for agents is how to cope if a client relies on an inaccurate on-line home evaluation. Zillow continues to generate more eyeballs than any brokerage site with the exception of Realtor.com and is now beginning to even surpass them according the Alexa.com traffic analysis. Whether the evaluations are too low or too high, they create an unrealistic expectation for both buyers and the sellers. Properties priced too low, create negotiation barriers for sellers who are accurately priced, but whose potential buyers are looking at an on-line evaluation amount that says the property is worth substantially less. When the on-line property value is too high, sellers run the risk of over-pricing their property that can cost them dearly in terms of market time and having to lower their price.  

All of these companies are competing for YOUR clients. What can you as an individual agent or broker due to compete? Look for next week’s article to learn more.