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By Stefan Swanepoel

RISMEDIA, April 20, 2007-During the last few years, not many issues have been as controversial and contentious as lead generation.

The concept has been around a long time, but it wasn't until third party "outsiders" started offering it as a subscription service, and very successfully by the way, that these companies became a focal point of many a heated discussion. The reason of course is simple – lead generation has quickly become big business in the real estate industry.

Companies such as HouseValues, HomeGain, RealEstate.com and House.com have honed in on a niche left void by many real estate brokers and are offering a much needed service to consumers. To attract the consumer they have perfected their way to the top of search engines or alternatively bought a spot atop the ladder. Either way they are effectively drawing in the eyeballs and building Web sites that increasingly rank higher than most real estate brokerage Web sites.

After scrubbing, cleaning and incubating the leads, lead generation companies then repopulate the leads back into the waiting arms of real estate agents ready to serve this growing new portfolio of online, home-buying consumers.

There are brokers and agents that have built and continue to build a growing business based upon receiving third party online leads. On the other hand there are others that are fed up with the fact that third party intermediaries are catching what they feel are their leads and then charging them a fee to get them back. Some call them interlopers and argue that they add little to no value in the process of consumers looking for properties.

But according to a 2006 NAR survey, 16% of agents (one out of six) currently participate in a lead generation program where they pay for leads. That seems to validate that lead generation companies are still very much in play.

Of course a question that often comes up is does it really work? Well it would definitely appear so. Like so many other initiatives in the real estate brokerage business it is also a numbers game. Let's follow the path from inquiry to sale for an average lead:

For every 100 inquiries received online at the Web site level, 70 are deemed not suitable or are rejected outright;

Of the 30 that are then distributed, 12 are actually assigned and handled by an agent; and
an average of three of the 12 result in a sale.

So that's a 3% closing (out of the 100 original leads that includes the 70 rejected leads). Certainly there are agents that can close between 5% and 10% but those are usually agents that have had quality training and are focused on dedicated follow up. Needless to say a strong and/or declining real estate market will impact these percentages.

Therefore an agent who is assigned one lead per week on average should be able to close one transaction a month. If this is all the agent does, he or she is doing little better than average, but if this one transaction per month is on top of their existing volume of business then this could be very profitable.

If online leads, irrespective of the source or distribution entity, can be converted into transactions and transactions is what selling real estate is all about, the concept will be around a long time.

ACKNOWLEDGEMENT
Lead generation, online business models and Web 2.0 are but a few of the "hot topics" discussed in detail by Stefan Swanepoel is his new 159-page 2007 Swanepoel Trends Report. To ensure that you are knowledgeable about what's really happening in the real estate industry make sure you get your copy. For free shipping go to www.retrends.com and use the promo code RISMedia.

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