Depending on many variables and factors, including your target audience, the marketing methods and channels you are planning to use, your copywriting skills and thus the conversion rates, the cost per lead will range between $15 and $75 per lead.
|Marketing Channel||Cost per Lead|
|Zillow (Premier Agent)||$20-$60|
Why is there no general answer to that question?
Wouldn’t it be nice if I could just tell you: ‘My dear real estate agent, you will always pay exactly $30 per lead and will always convert 10% into a sale of a nice $600, 000 property no matter what.’
That would be almost heaven, no uncertainties, no guesswork, and no costly marketing tests and mistakes.
You would know that by spending $300 you would get exactly 10 leads and make one sale, earning you $600,000 x 5%=$30,000 in real estate commissions.
This would mean $300 would earn you $30,000 and thus give you an ROI of 10,000% of your $300 marketing investment.
Unfortunately, reality (maybe that’s not the case in the real estate market in Narnia) is not that nice in this regard.
And besides, having such steady numbers would mean dealing with predictable robots or the Bork from Star Trek as market participants.
So firstly it depends on the target group you want to market to (buyers or sellers?), then the marketing channels you need to use to reach them, your copywriting quality and your offer, which leads to a certain conversion rate.
Marketing channels can be roughly divided into online marketing and offline marketing.
Since I don’t know if you are targeting buyers or sellers I will give you a rough overview of the channels available.
For paid offline marketing channels you have available the following:
- Press Releases
- Direct Mailing
For online marketing channels (mostly paid advertising) you have the following available:
- Your own web presence with content marketing/ SEO (this can be a hybrid consisting of your own time investment and/or outsourced work) via Blogs, Podcasts, VLogs, etc.
- E-Mail Marketing
- Social Media Marketing, such as Facebook Ads, Pinterest Ads, Twitter Ads, etc.
- Search Engine Marketing (SEM), such as Google Ads, Bing Ads, etc.
- Real Estate Listing Sites
In this article, I have already written about the 80/20 principle that you can apply to different marketing methods in order to generate a good buyer’s list.
So in order to come closer to the true numbers, I will pick five channels where enough data about costs per lead is available already, and where it is not, I will approach it with a short calculation based on logic.
In future articles I will also include those marketing channels, where I will have to get the stats with more research effort.
Before we get into the different channels let’s establish a basis to calculate the costs per lead, so we can estimate it better for channels where secondary data wasn’t available during my research.
Conversion Stats In The Real Estate Industry
The conversion rate for Real Estate ranges from 3.4% on Google Ads, 5.31% on Bing Ads to 10.68% on Facebook Ads (source).
Bear in mind that depending on the channel the target audience is in a different product/service awareness stage, so you can’t compare the numbers directly.
According to this source the average conversion rate is rather between 0.5 and 1%.
To be conservative in the below estimations, let’s do the average of all of the above conversion rates, which is roughly 4%.
How Much Do Real Estate Agents Pay for Leads On Well Known Real Estate Listing Platforms?
These are the 14 most well-known real estate listing platforms:
- Apartment Guide
I picked three of them and calculated the average costs per lead for each.
1) Zillow (Premier Agent):
There wasn’t much to calculate since secondary data was available. The average cost per lead ranges between $20-$60.
For Trulia no secondary data was available so, I needed to calculate the cost per lead.
The costs per month to list a rental property there is $29.
According to this source they have 23 million visitors per month and according to Trulia itself over 1 million homes listed.
So, a listing from you wouldn’t get 23 million visitors (that would be nice though), but rather about 23 million divided by 1 million homes, which would be 23 visitors per month (assuming an equal share of traffic).
Applying the 4% conversion rate from above would mean barely 1 lead (0.92 leads) per month per listing.
Thus we can deduce that the cost per lead per property you list there would be $29.
The price per month on realtor.com ranges between $200 and $1,000 (source). So we have an average cost of $600 per month.
When checking the website traffic on Similarweb you can find that the site gets 90.3 million visitors per month.
When I read their inventory statistics right, they have about 433,000 listings on their website (March 2020). This means you can get 208 visitors per listing per month.
Applying the 4% conversion rate this would mean 8.32 leads per month and thus a cost per lead of $600 divided by 8.32, which is $72.11.
How Much Do Real Estate Agents Pay for Leads When Doing Direct Mailing?
For this one secondary data could be found. This website (to be fair it’s in the direct mailing business) claims that according to the Direct Mail Association the cost per lead of direct mailing is $51.40.
This would make it less expensive than Google Adwords and Realtor.com.
How Much Do Real Estate Agents Pay for Leads When Using Social Media Advertising and Search Engine Marketing?
This one was also a bit easier to research. This website has already some good statistics about that.
On Google Adwords you pay $77.28 and on Facebook Ads $16.92 per lead.
Think Lead To Closing Ratio or Cost Per Acquisition (CPA)
But is it really a good idea to look for an answer to the costs per lead?
At first glance maybe.
But let’s take for example the average cost per lead from Facebook, which is $16.92.
Do leads from Facebook have the same quality as leads from let’s say Google Ads that cost you $77.28?
I wouldn’t necessarily say so.
You have to work a lead from Facebook more often through a funnel to convert further into a customer that wants to do a showing than from a Google Ad if you targeted your audience with a buyer intent keyword such as ‘Houses for sale in New York’.
In the latter case the potential customer is closer to ‘solution awareness’ than the Facebook audience being more often in the ‘unawareness stage’ and interrupted by your campaign.
If you factor in the lead to closing ratio, the picture starts to paint differently.
The lead to closing ratio asks how many leads you need to close a real estate deal.
And the cost per acquisition asks the question of ‘How much does it cost to close one real estate deal taking into consideration the lead to closing ratio?’
So, it’s basically the price you pay to get one sale.
It’s not about the cost per lead, but the quality of the lead or even better the lead to closing ratio, which heavily depends on your sales skills in the end.
How does it help if you get a cost per lead down to let’s say 10 cents if you have a lead to closing ratio of 0.002%?
You would basically have marketing costs of 10 cents divided by 0,002% equals $20,000 to close one deal with this ratio, or put in other words a cost per acquisition (CPA) of $20,000.
This would also mean that you had a sales problem.
Well, with a $600,000 property giving you a full 5% commission this would still mean a profit ($30,000-$20,000) of $10,000.
But once you get into average housing prices and might even have to split a commission things could get a bit more ugly.
So in my humble opinion the better question to ask would be:’ What’s the cost per acquisition for real estate agents?’
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