Does it Pay to Buy Real Estate Leads? A No-Holds-Barred Guide to Making Paid Leads Worth It

Are paid leads really worth it?

For the majority of up-and-coming real estate agents and teams, that's the $64K question. But if you get it wrong, it can cost you way more than that.

We think it's time to stop complaining about "bad leads" and start reaching new levels in your real estate business, beginning with a frank conversation on what it really takes to win with paid leads.

In this definitive guide, we’ll cover the most common types of paid leads, the top places where you can buy real estate leads online and offer up proven, practical advice from real estate agents, brokers and coaches on how to make the most of paid leads—including an evaluation of the actual numbers adding up to awesome ROI.

So, is buying real estate leads really worth it?  

Let’s find out!

‍Table of Contents

• The 5 Core Types of Real Estate Leads for Agents and Teams
• What’s the Best Place to Buy Real Estate Leads?
• Are Paid Leads Really Worth It?
• 3 Simple Ways to Make the Most of Your Investment in Paid Leads
• How to Calculate Your Real Estate Lead ROI

The 5 Core Types of Real Estate Leads for Agents and Teams

Before we get into the where and how of purchasing real estate leads, it’s important to step back and think about the core pillars your current lead foundation is built on.

Because the truth is, no two real estate businesses will ever look the same.

Nor should they. One team may have a finely tuned process for winning on Realtor.com, while another top producer might be a total boss at converting Facebook leads. Before you break your budget on a spray-and-pray approach to paid lead gen, it’s important to think about all the lead channels available and which ones best fit your unique business philosophy.

Let’s start with the five major types of real estate leads (both “paid” and non-paid):

1.   Pay-Per-Click Leads

2.   Paid Social Media Leads

3.   Real Estate Marketplace Leads

4.   Organic Leads

5.   Referral Leads

Chances are, you’re already generating a solid amount of leads from at least one of the above lead sources. Take a minute to jot down the number of leads coming in from each channel and/or source type listed above, plus the average time to conversion on each.

With these two simple figures in mind, you’ll have a much better idea of which additional paid sources to add to your lead gen mix, or if your time is better spent optimizing your sources of “free leads”.

1. Pay-Per-Click (PPC) Leads

These are real estate leads from advertising on search engines such as Google and Bing. Here, you are targeting specific search queries related to real estate. 

Obviously, Google Adwords is the predominant platform for PPC leads. It’s trusted, it’s proven and many real estate agents love it. But be warned—Google Ads can get pricey fast.

Be prepared to spend an average of $116.61 cost-per-acquisition (CPA) on the Google Search Network and an average of $74.79 CPA on the Google Display Network. 

Some real estate CRMs come with done-for-you PPC campaigns which can be a great time-saver, but one that comes with a downside. Effective search marketing should be highly tailored to your business, and not every done-for-you system allows the level of control you might need to generate profitable results. Plus, many search leads are still early in their research and need time before they're ready to convert.

For this reason, it’s crucial to have a flexible, customizable follow up plan in place for how you nurture your PPC leads until you’re able to get them across the conversion finish line.

Source: WordStream

2. Paid Social Media Leads

Buying real estate leads on Facebook, Instagram, etc. can often be comparable to PPC generated leads in terms of both cost and conversion strategy. But unlike PPC ads, where you can target a specific search query, social media ads typically only allow you to use prospect interests and other broad targeting parameters to reach potential leads.

Targeting a diverse lead audience via social media ads can absolutely deliver a solid amount of leads, some of which will have at least some interest in buying real estate—but you’ll need to filter extensively if you really want to attract qualified leads. 

This is why many real estate agents utilize Facebook ad targeting in combination with another tool like Ylopo which allows them to customize lead retargeting and automatically send prequalified leads into their CRM where they can then track lead behavior and improve their ROI.

3. Real Estate Marketplace Leads (A.K.A. Portal Leads)

Real estate marketplaces such as Zillow, Trulia and Realtor.com usually rank for most, if not all of the high-priority real estate keywords on Google. Instead of competing with these platforms for search traffic, you can advertise on them and instantly generate high-intent leads.

Sounds great, right? Well...there is a downside. 

The cost of paid leads via marketplace platforms can easily range from $20 to $80 per lead, or $100 to $1,000 per month. It all depends on what’s happening in your market and the parameters you set around how you use these sites.

The upside is, real estate leads purchased from paid portals typically have high intent. Because they are already in the process of buying or selling their home when they visit these listing sites, you can usually count on a fair number of warm or hot leads from these sources. 

Of course, you will still see plenty of window-shoppers coming through, so you’ll need to be prepared to nurture those leads over time. The other main challenge with portal leads is that some paid sites sell the same lead to more than one agent, which means you need to be ready to respond with lightning speed.

If you’re using expensive marketing channels like Facebook ads, PPC or SEO our Tracking Pixel picks up lead source data automatically and gives you built-in marketing reporting so you can track ROI all the way through your pipeline.

4. Organic Leads

Organic real estate leads are exactly what they sound like. These leads come from your own channels and networks.

For example, leads earned via your email newsletter, landing page, website, blog or social channels.

Real estate leads generated via these platforms are as close to free as you can get. Of course, you will have put in some work to regularly share content on your owned platforms. But after a while, you’ll start to notice a steady flow of incoming leads. At this point, all you need to do is optimize your best content and conversion flows to ensure that you’re securing as much ROI as possible from these free channels.

One downside, however, is that many solo agents or smaller teams often struggle to either delegate or carve out the time needed to do that. If you really want max ROI on your organic leads, it pays to develop a smart marketing strategy that you can either delegate or stick to.

5. Referral Leads

Referral leads that come in via your past clients or sphere of influence (SOI) tend to be the highest quality leads, and any discerning Realtor should aim to get as many referral leads into their pipeline as possible. 

But for most folks, that often sounds easier than it feels. The good news is, you really only need two things to ensure a steady stream of referral leads:

1. The ability to offer a stellar customer experience
2. A simple plan for consistently reaching out to your sphere

For example, back in 2017 the team at Graham Seeby Group launched a four-part follow up campaign targeted at a list of just 279 past clients and SOI contacts, some of which hadn't heard from them in years.

The result? Their business skyrocketed to $90 million in just 4 years.

Remember, your potential clients trust the recommendations of their family and friends. Nothing is as powerful as an endorsement from a happy client.

‍What’s the Best Place to Buy Real Estate Leads?

Alright, now that we’ve covered the benefits and drawbacks of each core type of real estate lead, you’re ready to roll up your sleeves and determine which paid leads sources are worth your hard-earned money.

As mentioned, every real estate prospect has their own timeline and priorities. It’s up to you to turn each lead into a real, revenue-generating relationship over time.

Here are some of the most popular places to buy real estate leads:

Realtor.com

• Between $200 to $1000 monthly
• High lead quality & volume
• You can buy exclusivity for a particular zip code

Zillow (Listing agent & Premier Agent)

• $20 -$60 per lead for listing; $250 per lead for a premier agent listing
• High ROI
• Premier agent listings guarantee more exposure across Zillow

Trulia

• Cost is similar to Zillow
• Rated as the most mobile-friendly real estate marketplace
• Second to Zillow in volume of leads

Ylopo

• $295 monthly subscription; $1000 setup fee
• Easy to use interface attracts lots of leads
• Great integration to Facebook Ads

Bold Leads

• Starts at $589 monthly subscription (this includes a minimum ad spend of $250)
• Reduced competition for leads as the platform restricts the number of agents within a zip code

RedX

• $39.99 monthly subscription
• One of the most affordable lead generation platforms
• Focused on particular niches (for sale by owner listings, expired listings and foreclosures)

ProspectNow

• $119 per month
• Predictive tool that identifies probable sellers to a high degree of accuracy

InboxRealEstateLeads

• $25 per lead
• You only pay for the leads you want (you can return low-quality/unqualified leads)

Offrs

• $300 monthly subscription
• Uses a predictive algorithm to provide high quality leads
• Also provides an exclusivity option for leads

ReadyChat

• $199 - $399 monthly subscription
• Great customer service
• Great for referring warm leads to your database

Google Pay Per Click

• $1 to $2 per click
• Hot leads who are actively searching for a solution

Craigslist

• $3 - $5 per lead
• High volume but mixed bag (low & high-quality leads)

Facebook Ads

• $0.97 per click and $7.19 per 1000 impressions (recent average)
• Flexibility to set your budget
• Wide pool of leads
• Need to filter for qualified leads

So, Are Paid Leads Really Worth It?

To answer this question, we reached out to some of the top real estate agents, brokers and coaches. Here’s what they had to say. 

Paid Real Estate Leads Are the Best Way to Guarantee Commissions — Robert Slack, Broker-Owner, Robert Slack Fine Homes

Robert Slack is the Broker-Owner of Robert Slack Fine Homes and has built a successful brokerage on the back of Zillow and Realtor.com leads. 

According to Robert, the biggest pro of paid real estate leads is that they are, "Absolutely the best way to get in front of interested clients on a regular basis and keep a steady stream of clients for agents."

A steady stream of clients sounds pretty awesome, right? 

But when we asked him about cons, this was his answer: "Cost! And 95% don't work out."

95%?! Wow. No wonder agents get so discouraged when they get started with paid leads. 

Part of Robert’s success is his airtight system for funneling all his Zillow and Realtor.com leads into a single location where he and his agents can view, track and record their complete nurture history and see which leads are most likely to convert.

Paid Leads Are Worth It (If You Can Prove You’re Better than Zillow) — Anthony Malafronte, Owner, My Tampa Agent

For many agents, the competition from real estate marketplaces like Zillow, Trulia and Realtor.com has made the question of paying for leads even harder to answer.

“Zillow is the real estate mindset for a lot of people,” says Anthony Malafronte, owner of My Tampa Agent. 

His solution? Be prepared with an awesome real estate script.

“When people think of Zillow they think of real estate, they think of houses. When you think of Starbucks you think of coffee. Zillow's done a great job of building that. The ex-CEO just put his house on the market for $7 million more than the Zestimate. So we can be better than Zillow. It really isn't that hard.”

Here’s how he sees it:

Keep Your Lead Sources Balanced — Barry Jenkins, Team Owner & CEO, Better Homes & Gardens Real Estate

Barry Jenkins is a top-producing broker with Better Homes and the success of Barry's business is based on the core philosophy of leverage.

"You should have both in your life. You should have a sphere, you should have previous clients contacting you and you should buy leads. Because those new leads are potentially previous clients eventually," says Barry.

Barry breaks it down to an hourly rate to determine whether the lead gen activity is helping him and his team scale. 

"If we look at our day based on an hourly rate, both internet lead generation and sphere have a cost. If I go knock on a door for 6 hours and my hourly rate is $300 for not-so-hot leads, just contacts that one day will buy, that's just not worth it. I would never spend $1,800 for 6 cold contacts. So saying it's free is just not true."

Barry believes, "Your lead generation needs to be a well-balanced diet." 

For Barry, the ready-to-buy bottom of the funnel leads from portal sites like Zillow and Realtor.com are the steak in a well-balanced lead-gen platter. But those leads are too expensive to use to effectively scale his business, so Barry mixes it up with some middle of the funnel leads (think: Ylopo leads as the veggies on your plate) and top of funnel leads from places like Craigslist and Facebook ads.

"I try to give my agents 30 to 50 leads per month, little bit of portal, healthy amount of Ylopo and then my top of funnel leads would be things like Craigslist and Facebook ads who aren't ready to buy anytime soon but I want my agents to have that because first of all, I need to scale my business and this gives me a way to feed all the mouths on my team. And then of course, previous clients. There's no doubt about it. If you have 50 people that love you, you have a sustainable business on your own," Barry says.

Paid Leads Can Give You Awesome ROI if You Convert them in a Way that Works For YOU — Lee Davenport, Owner, Learn With Lee 

Lee Davenport is an Atlanta-based real estate coach and consultant who has seen her fair share of agents losing sleep over the leads they've bought.

Here’s how she sees it:

"The pro of purchasing real estate leads is to give you some IMMEDIATE action in your pipeline if you are a new or returning agent, particularly if you are someone without a local sphere of influence, an established marketing plan or an existing database of clients. Is this activity the best use of time? Not always, depending on the quality of the lead source, which can make this a con if the lead source is not reputable."

Lead quality is a major issue. And with real estate leads, it seems that more often than not, you get what you pay for. She believes it's important to build your business based on what will work for your unique personality.

For her doctoral dissertation, Lee studied the top 1,000 agents in the US to deconstruct their secret sauce. Her top tip? Do what works for you.

"For those that do not like connecting with leads who don't know them and didn't ask to know them, cold calling is not the best. Thus, these pros would do best with paid leads that allow a warm transfer (meaning the lead expects, wants, AND welcomes some sort of follow-up like a call, text, email, etc.). For those of us that can handle the cold (including the icy rejection), then leads that have a true real estate need, whether or not they are expecting to hear from us, can still be a slam dunk."

3 Simple Steps to Make the Most of Your Investment in Paid Real Estate Leads

Whatever your approach, success in this business is all about building a real and relevant relationship with your prospects over time.

Here’s how to make that happen in three easy steps.

Step 1. Set Your System in Place

It is entirely possible to build a thriving real estate business based on free lead sources. However, there will come a time when you need to integrate paid leads in order to take your business to the next level.

The first step to an effective lead management process is to get all your leads flowing into one central source.

From there, you can automate your phone, text, email and even direct mail follow ups using relevant content, based on where your prospects are in their home-buying or selling journey. Then, you can automate a personalized follow up sequence to nurture each prospect in the most relevant way possible (without having to chain yourself to your laptop).

Timely messages like a quick "Happy Birthday!" can go a long way, but the bigger your database gets, the harder it is to keep up. The easy Automations inside Follow Up Boss will handle all of it for you.

Step 2. Automatically Accelerate Your Speed to Lead

For hot leads coming in from paid portals like Zillow and Trulia, fast response times are crucial.

A fast, automatic and personal response for warm or hot leads is critical to your conversion rate, especially when you consider how many other agents may be contacting them.

"Speed is an absolute must and with Follow Up Boss's 4-point auto text responder, and instant calls from our call center, we are able to make contact with a high percentage of leads," says Robert Slack, Broker-Owner, Robert Slack Fine Homes.

Step 3. Be Consistent with Every Real Estate Lead in Your Database

If you're not yet ready to invest in a high-octane team of ISAs, you can still win simply by being the agent who is always there. 

For top and middle of the funnel leads (and even some of those portal leads who you might have serious quality questions about) the way to win will always be in the long-term follow up. Set up an automated drip campaign based on lead type and timeline and you’ll see a steadier stream of ROI on all your lead sources.

In Follow Up Boss, you can trigger an automation to start when you take an action, such as tagging a lead when they view a property on your website, or you can make it time time-based, for example “30 days after close date.” With the right automations in place, you’re always there to engage your leads when something important happens.

How to Calculate Your ROI on Paid Leads

Last, but in absolutely no way least, when you start spending money on leads, it's natural to want to see some immediate action in return. 

But even with paid leads in the mix, real estate is still a long game. Here are a few proven ways to calculate your ROI on purchased leads.

ROI Formula 1: Number of Deals Closed per Every $100 Spent

If you're new to the game, Dr. Lee Davenport recommends sticking with whatever paid lead choice you've made for at least a month. Once you've given it a real go, take a look at how many deals you closed per every $100 spent.

"For agents new to paid leads, I recommend committing to a program for at least 1 month to personally evaluate the frequency and quality of the leads AFTER confirming from other users their favorable experiences. Facebook, my frenemy due to its access to data, has lowered the cost per lead to as little as $5-10 per lead. Not all lead generation sources will provide leads for that low of a cost but ideally, 1 client (who gets to closing) per $100 spent is fantastic."

This is a great way to quickly eyeball your ROI and still make an informed choice about whether to keep going with a particular approach or lead source.

ROI Formula 2: GCI / Lead Cost

Robert Slack looks at the ROI real estate leads a little differently, based on his role as a broker-owner. According to Robert, you should divide your gross commission income (GCI) by lead cost to get your ROI.

This is a classic way to get a real grip on your paid lead ROI, and it's even how Zillow recommends you do it. As you can see below, conversion rate is everything.

Source: Zillow

ROI Formula 3: ROI by Lead Source

If you want to dive in a little deeper to see which sources are really giving you optimal bang for your buck, try Ryan Graham's approach.

"We break apart all of our paid lead sources. For example, Google Pay Per Click, Realtor.com, Facebook Ads, and plug in services like ReadyChat. We look at our spend per month, per quarter, and per year. We then count the number of leads we receive from the various sources. This gives us our cost per lead. Then we count the number of closed sales from these same sources, and the associated sales volume and Net Commission. This gives us or ROI."

According to the owner of Atlanta-based team Community & Council, "It’s important to know both of these ratios, as well as the conversion differences. It’s also important to understand how these change over time and with increased and decreased spending."

That's right. The paid lead game is as dynamic as real estate itself. Whatever approach you choose, you're going to have to consistently track your progress and adjust your systems for optimal results.

If you’re ready to hit the next level, Follow Up Boss can help.