There is an active market for leads in real estate, though the economics are generally hidden from the public. I thought it would be a good idea to shine a light on this corner of the industry so that you can understand how it all works.
Real Estate agents build their business based on three main types of leads; Direct, Paid, and Contingent. The differences between these lead types matter because the economics vary for the agent, so the agent’s behavior and motivations can change.
Direct leads are opportunities that come directly to the agent based on their personal efforts and relationships. This is the historical basis of the real estate business, where agents worked to get to know as many people in their local community as possible and be the go-to option for all things real estate.
Examples of Direct leads include past clients coming back for a future transaction, referrals from people not in the industry (friends, family, coworkers, past clients, etc.), and people who respond to the agent’s marketing or attend their open houses.
Direct leads are by far the best relationship for both sides.
From the agent’s point of view, there are no additional costs involved. Direct leads are the result of an agent having a good reputation and marketing their services.
People looking for help with a potential real estate transaction have full information about the agent they are contacting. They can interview the agent and decide if the two would work well together without worrying about the influence of an outside third party.
Direct leads are the baseline to which we will compare both Paid leads and Contingent leads.
Continue reading this series with Part 2: Paid Leads.