Real Estate Agent Conversion Rates: Huh?

Question

I am trying to make heads or tails out of conversion rates according to the quote from NARS, the conversion rate for agents is 0.4-1.2%. Huh? From what I have read, agents are spending something like $30ish per lead. At $30/lead and a 50/50 split a 1% conversion rate would result in a loss...

Can somebody shed more light on actual conversion rates you experience?

Most real estate agents and brokerages have self-reported a customer conversion rate of 3-5%. However, this might be a bit optimistic based on the market the agent is in. The National Association of Realtors® disclosed that the rate is closer to 0.4% - 1.2%. Basically, this means that for every 200 leads you can obtain, you’ll only convert one or two of these to a customer or client.

Chris Mason · Answer

Averages like that are meaningless. I know Realtors that it almost feels like if you talk to them, boom before you know it you are closing on a home purchase or sale. And there's lots of people throwing thousands of dollars per month at realtor.com/zillow/etc "leads" with abysmal conversion rates, 1 in 200 would be a wet dream for them.

Also keep in mind that in MANY markets, there are more active real estate licenses than there are home sales in a given month in that market, meaning in your "average month" for most (>50%) real estate agents consists of $0 of income and 0 closed sales.

If your intent is to be average, I'd suggest another career. And it's the same on my end as a LO, so don't get any bright ideas there.

Charlie Cameron · Answer

@Carl Ohai At an 80/20 commission split those numbers above start to work.  I'm turned off by Zillow, Trulia and Realtor lead generation due to the bombarding of calls that clients can suddenly received if the lead is sent to multiple agents.

I'm starting up PPC (google) and FB ads that feed right into my CRM.  MakingItRain - which ranks you first on Google - on average costs $15/lead.  That math works better as well.  And those leads are exclusively yours.

You could also target certain client lists (and get those lists for free sometimes) and great long term lead text/email campaigns.  FSBOs, expired/withdrawn listings, folks that are likely to move soon, renters... the list goes on.  And much of this you can do for free or pay pennies per lead to start pinging.

(I'm a newer agent, for whatever my thoughts are worth!)

Russell Brazil · Answer

87% of all agents are failing out of the business entirely, so I would expect average conversion rates to be drastically low.  Id say most of the top 1%ers have like a 25% conversion rate, though I wouldn't know how to check that. I have a conversion rate in the 75-80% range, but I also only deal with self generated leads, which means most of my clients are presold and not interviewing anyone else.

Charlie Cameron · Answer

@Carl Ohai I'll be attending math behind lead gen and making it rain trainings tomorrow (live, virtually).  Should be interesting.  I can let you know what I learn.

Carl Ohai · Answer

Have you started using this $15/lead service? I highly doubt it ranks you first, unless you are talking about Google AdWords. I looked into Google AdWords, but the problem is that around here there isn't sufficient volume of queries to rely too heavily on that.

For example, there are about 2500 total real estate related queries per month. At an average 2% CTR that only yields 50 total clicks per month.

Carl Ohai · Answer

Thanks for the input. I'm something of a "numbers" guy (I actually failed out of college pursuing a career as a statistician).

From what I gather, Zillow's current premier agent program (they are rolling out a different program in some markets) charges based on a bidding process for the amount of the time you will appear in the "Premier Agents" box.

I think I will likely focus my marketing efforts on PPC and FB ads. I've lived here for the last 10 years and I have never seen a Facebook ad for an agent or brokerage before. If I google "Mytown Zillow" or "MyTown Real Estate" there are zero ads. To me, this signals an opportunity to capitalize on those avenues...

Charlie MacPherson · Answer

@Carl Ohai  Exactly.  Unless you are practicing in a high price market, the numbers don't work well at all.  As far as I know, ZTR don't base the cost per lead on the average sales price in the area.

Here in Plymouth where I live now, the average sales price over the last 6 months was just under $430,000.  Figure a 2.5% commission coming in to the buyer's agent.  After all the splits and franchise fees are paid, about 62% of that commission goes to the agent.

Those numbers work out as $430,000 X 2.5% = $10,750 gross commission.  62% of that is $6,625.00.  At 0.5% conversion, you're barely breaking even on the ad spend.  And of course, from that remaining $6,625, you have to pay income taxes, health insurance, MLS dues, NAR dues, E&O insurance, marketing costs, car expenses, etc.

I'm about to relocate to mid-coast Maine.  Average sales prices there are about $250,000.  Running those same numbers, I'd net $6,250 X 62% = $3,875.  Those numbers REALLY don't work.

The lesson is this: if you really want to make money in real estate, find something flashy to sell to Realtors.  And be sure to follow the ZTR model - charge a lot, guarantee nothing.  When one agent drops you, there will be 1,000 lined up behind him.

Carl Ohai · Answer

Thanks for the input, everything you said makes sense. I don't understand how people get a return at 0.5%-1% conversion rates. At $30/lead the CPA is $6,000/$3000.

Charlie MacPherson · Answer

@Carl Ohai I was involved in a JV with an extremely large and successful brokerage in Omaha a few years ago.  they had done a national survey to try to get a handle on conversion rates, defined as closed sales divided by raw incoming leads.

While Zillow, Trulia and Realtor will not guarantee anything in terms of conversion, more than once I've heard statements like "if we got you 100 leads, do you think you could close 5 of them?"  That suggests a 5% conversion rate.

The results of my JV partner's survey said that the real conversion rates were between 0.5% and 1%.  One close for every 100 to 200 raw leads.

A lot of this has to do with the evolution of the business over the last 20 years.  When we bought our home in 1985, we put on some decent clothes, drove an hour to the broker's office, knocked on the door and said "Hi mister.  We want to buy a house.  Can you help us?"  At which point, we sat down to look through a huge MLS book where all of the data lived.  We were already committed to buying by the time we walked through the door.

Now, with all of the MLS easily accessible, people are literally riding on the train, drinking at the bar or sitting on the toilet while they're flipping through homes on Zillow.  They click that "I want more information" button and *poof* - they're a lead that probably cost about $30.00.  They could be years away from a buying decision.

Worse, most of the leadgen programs on ZTR provide sales leads to 3 or more agents, so it becomes a "speed to lead" function.  Several years ago, we were told to call leads back within a half hour.  Now, that goal is to contact them in seconds, not minutes.

I did get pitched by Realtor on a lead program that would send leads exclusively to me.  1,180 leads/year, guaranteed.  For the breathtaking price of $81,000.  That's not a typo - $81,000.  That could potentially be a reasonable investment if it weren't for the fact that buyers and sellers are probably also looking on Zillow, Trulia, C21, Coldwell Banker, RE/MAX, and a dozen other sites.

Competition definitely plays a major part in conversion rates.  I can't tell you how many times I'm working on a lead and hear "I just found out that Aunt Jane's son's second cousin is a Realtor.  I have to buy/sell through him."

According to my MLS, there are 99 real estate brokerages in my current town of Plymouth, MA.  A mailing I got from Homelight said that there are 787 real estate agents in Plymouth.

I can't tell you how many times I'm working on a lead and hear "I just found out that Aunt Jane's son's second cousin is a Realtor.  I have to buy/sell through him to keep peace in the family."  When 1.4% of the town's population hold a real estate license, that's not much of a surprise.

We're about to relocate to China, Maine and I'm looking forward to what is probably less than 1/20th the competition.

Lien Vuong · Answer

The stat I'm more familiar with is 2-3% but still marginal nonetheless. The biggest thing to remember purchasing any sort of leads like that is that you have to follow up follow up follow up. You might not see the $ ROI on these leads right away but with a little nurture, you'll be able to turn them into actual transactions in 12 -18 months.

It's important to have different streams of leads also - your SOI/COI, networking, online, referrals, etc.

Real Estate Agent Conversion Rates: Huh?

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