Hi all,

I've been registered here a while, and reading these forums even longer, but finally had to post - such a great community going here, hope I can make a decent contribution over time.

Anyway, getting onto my post:

I'm a web developer and I specialise in web development and search engine optimisation for the real estate industry. I've recently left my position as a lead developer for a real estate web solutions company to launch my own sites.

I currently have one website which is receiving a face lift, where I work with various agents for a 50% commission split on leads that result in a sale.

Now i've just been reading this thread: http://www.realestatewebmasters.com/...8&page=1&pp=10

I didn't want to comment there as its an old thread, but I'm in the process of changing my site into more of a portal, and offering various advertising to estate agents. The main platform will be Pay Per Enquiry - so agents can advertise their properties for free, but have to pay a small fee to unlock enquiries generated on them.

I just wanted to get opinions on this kind of business model from you guys, there seems to be a very low opinion of lead generation services, but from what I can tell the ones that are seen as useless and in some cases scams all involve set monthly fees, or claims of 1000's of leads. Where as mine would just be performance related, you only pay if you actually get an enquiry, and I'm not promising anything except that absolute timewasters will be filtered.

Is that a fair deal? The figure im thinking about charging is in the low $xx per enquiry, so agents will know exactly how many leads they can get for x amount of advertising spend.

I have a limited experience of such things from the agents side, would anyone be able to provide any information to me, roughly such as what is the average targetted, enquiries on agents actual properties required before a sale is achieved? I know the general marketing answer is 1 in 100, but if anyone is willing to share such information id be greatful (even via P/M).

What also might be useful, is if anyone could provide a ballpark figure on what is generally paid per lead, i.e. if you take all of your advertising spend, and divide it by the leads, what is the maximum that you can collect leads for, and still make a profit at the end of the day - if that makes sense - and of course isn't too sensitive to business for anyone to talk about.

Id really appreciate it if anyone has any comments on my plan, good or bad. (just don't be too harsh )

I'm operating in the Spanish market by, but information on lead conversion etc shouldn't differ too much I wouldn't think. Look forward to hearing from you all.

Kind Regards,
Matthew

Anybody got any comments on this at all? Or is the post too long

Good luck with your new venture!

I personally would not pay a 50% commission split with anyone who just provided a lead. Even on a closed deal by the time I pay you, my broker, the advertising on the listing, etc, etc. It doesn't leave me with much and I'm the one who did the work!!

I would also prefer to pay a flat advertising fee for my properties and receive all of the leads as a part of the advertising cost, not an additional fee.

Finally, with free sites like Craigslist, etc., I don't see why I would pay for any part of it. The MLS is what sells properties in our area!!

Hi bobbyj,

Thanks for your input - I don't know about in the US, but in Spain the average fee for selling property is 5%, and compared to the UK that's pretty high - so maybe if the US fee's are similar to the UK's, that could be why commission splits are generally higher here, as theres more profit involved?

Would it not be fair though, to say that perhaps without that lead, you would not have sold the property, therefore any profit that you make on it is worth while? And in paying the commissionar you are guaranteeing that they pass their future leads to you as well? Just something I've wondered about, how it's seen from the estate agents point of view.

Anyway, back on track - I understand the thing about paying a flat advertising fee, but that does introduce an element of risk, you may pay a flat fee and not receive any enquiries at all. Where as with pay per lead, you only pay if the advertising does its job. Even if it does its job, but maybe not particularly well, leads divided by advertising cost, and I would think it works out quite high usually.

There wouldn't be a standard fee, so the risk is relatively low - in the event that my site was able to generate lots of leads - then perhaps I could introduce monthly budgets - so agent's don't spend more then they are willing to (Kind of like PPC).

Regarding the craigslist thing, I can see your point. But is there not always room to do more business? Can you ever have too many leads? I don't think Craigslist is as widely used, or popular in Europe - so perhaps that's just not caught on yet. Which could be a good thing for me anyway, if it has the effect that you've suggested on paid advertising :s

Thanks again for your input, much appreciated.
Matthew

to say that "any profit" is worth while is just silly. If you invest 1000.00 in something and it returns 5.00 you made a profit, but was it worth the risk? That's the question to ask!

Not all clients turn into repeat clients much less referring clients.

IMHO, flat fee advertising is much less risky than what you are talking about because I know up front what I am paying and what I am getting. With your system I have no idea about either.

Homegain and some of the other referral sites generate a lot of inquiries, but that's all they are is inquiries. People who wanted to see a little information, but had to leave contact info to get it. They rarely if ever are serious about making a move. RealEstate.Com guarantees only serious leads, people ready to make a move, but most times they aren't. People who are serious about buying or selling are contacting Realtors or Brokers websites not referral websites. There are some of those types of leads that produce activity, but by the time you weed through them, pay for them, pay all of the splits on your commission, they just aren't worth the risk!

Hmm.. when I said repeat, I mean from the referrer, rather then the client. i.e. if I refer a buyer to you, and they purchase, then I get my commission, and I will continue to refer buyers to you. If you are unwilling to take the referral, or pay commission, then I will refer my buyer to your competitor.

We're talking average commissions of 15,000 euros in this area of Spain, with a 50% split at 7,500 euros - does that not warrant a little time working on the lead? Time wasters and information hunters can be quickly identified, so it should only be ones with a glimpse of hope that really have time invested into them.

At the end of the day, someone is going to make an extra sale. The risk that you've taken is that you will have to work the lead, to turn them into a buyer, but without the referral, that lead wouldn't be there to work.

If you have enough potentials that you don't need referrals, because you would make more profit spending time on your own leads, where you have to pay no commission - then thats perfectly reasonable.

Obviously I'm not an estate agent so I apologise if I'm way off track with my understanding. I think it could be a location based difference, as the only place i've heard people saying they wouldn't pay 50% is on this forum (my only exposure to US based agents) - so it could be down to the numbers, or maybe just business attitude. An interesting topic though non the less.

In response to not knowing what you are getting for advertising, let's take this example:

On site A (Traditional Pricing Structure), you pay to list your properties for a set fee. You know what you are getting for your money, which is to list your properties and have them put infront of Site A's visitors, you don't know if it will produce any enquiries, but that's the risk that you take in advertising.

On site B (My Plan), you pay nothing to list your properties. You know what you are getting for nothing, which is to list your properties and have them put infront of Site B's visitors, you don't know if it will produce any enquiries, but you haven't paid anything, so theres no risk.

Now assuming Site A produces nothing, you've blindly taken a risk. If Site B produces nothing, you've taken no risk except maybe time, and have lost nothing as a result.

If Site A works, and you receive more leads then you could for the price per lead on Site B, then yes you've won the first stage of the gamble (producing leads), but you had to take an additional risk to do it, which was paying to advertise the property, you then have the next risk of hoping that some of the enquiries convert.

Both still involve the second gamble, that any of those enquiries will convert into a buyer.

Even if you received say, 25 leads from Site B - based on going UK rates, that would only equal what you've paid to advertise on Site A for a month - and on Site A for that fee, you could still receive nothing. It's the difference of paying up front, or paying on performance.

"People who are serious about buying or selling are contacting Realtors or Brokers websites not referral websites"

I don't think this is correct, from first impression, there is no difference between a realtor and referrer's websites - in terms of internet traffic, its just a case of who comes up tops on the search engines, and who offers the most advice and information. Otherwise, I'm failing to understand the statement?

Thanks again for your input, although we're differing quite a bit its good to discuss it and come to a conclusion

Regards,
Matthew

I'll make this short......50% is way to high for the US. You have home gain,and a million other sites that don't charge near that for a referral fee. Honestly, my cost per lead is less than 1 euro. I have no split and therefore I keep 100% commission. In your example I would make 14,999 euros.

Most any real estate agent with common sense knows that getting your own leads either by ppc or naturally is soooo much more profitable. That being said look at all the agents who do use these referall companies. If they can do it then I guess you can too. Good luck!

__________________
Charlotte NC Real Estate | Lake Norman Real Estate |
Charlotte Homes for Sale

A common referral fee in Atlanta is 20%. I believe it is around that everywhere in the U.S. Time = $ and the ratio for the leads you are proposing is not woth the time for the money.

__________________
Ryan Ward, REALTOR® - Keller Williams Realty Consultants. (404) 630-3187
Atlanta Real Estate - My featured area is Alpharetta Real Estate and it is where I call home. Read my Atlanta Real Estate blog.

Thanks for the responses guys, can I just say that the commission based conversation is a different issue then the pay per lead one. Would have possibly been wise for me to have created two seperate threads.

I think we've concluded that this idea would probably be alot more difficult to pull off effectively if I were targetting the US markets.

Naturally generating leads through organic SEO is always going to be a winner, but alot of estate agents aren't that SEO savvy, or are unwilling to invest - so I guess they're the guys that depend more on other marketing platforms..

As for PPC, here its roughly €2 per click, 100 visitors is going to cost you €200, and doesn't guarantee to generate any enquiries. You could get quite a few enquiries guaranteed for advertising on my site.

As I mentioned before I think this discussion is a little non effective because of the huge differences in the US market. But I appreciate all the responses.

And wow I need to cut down on the huge posts

Thanks Again,
Matthew