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Harvesting the Redfin green: Learning how to work with web-based prospects who may not have known they were contacting a Realtor.

I built our first real estate web site in June of 2001. I had just gotten my license that May, parking it with an apartment locating service called The Apartment Store. The folks Jeff Brown calls “house agents” like to laugh at niche players in the real estate world, but I passed on three residential brokerages to do rentals. Why? Because I knew I would starve to death — as 85+% of all new licensees do — waiting for my first home buyer or seller. Instead, I took a job where I stood a chance of getting belly-to-belly with five or six motivated people a day.

But: I built the web site because I wasn’t in love with the people I was meeting. Jack English, the broker, had built his business around serving extremely marginal clients — apartment seekers with bad credit, past judgements, felony convictions, etc. Everyone deserves a second chance in life, but, for the most part, I turned out to be a poor fit for the targeted clientele. I moved some interesting people I was delighted to help — for example, two recovered heroin addicts and the sweetest paroled murderer one could ever hope to meet — but I also met a lot of people to whom no one should ever have extended credit.

Even so, the experience was great. I got to talk to a lot of people, showing a lot of apartments and rental homes, and I got to learn, very quickly, what makes the frog jump. That’s why I built the web site: I realized that Jack’s business model was missing a better segment of the rental market. Less-than-ideally-qualified tenants needed help because they didn’t know who would take them and who would turn them down. But there was a much larger, much juicier, much better-qualified pool of prospects out there: People with plenty of money but no time.

That first site, TheApartmentStore.org, was a killer lead generator. No one was doing anything using forms in those days, and GoTo.com was still selling pay-per-click for as little as a penny a click. I was hauling in four and five forms a day. And they were very elaborate forms, devised to eliminate or at least identify loosely-motivated responses. And the keywords I was using were targeted to the prospects I wanted, bigger-budget tenants with scratch-and-dent credit — not body-shop issues — at the worst.

That much was cool. Apartment locating is a referral-fee business, and I was making money off of tenants I never even met in person. I had my day carved up into six 90-minute segments, and my goal was to work a showing appointment into each one of those slots. In August of 2001, I closed 30 leases. I made $6,000 for that month, which seems pretty pitiful now, but my goal was experience, not money.

But that was when I first came to be jaundiced, to put it nicely, about internet leads. I was already making my web site’s visitors jump high hurdles to submit a form, but there were still way too many bogus forms, too many unmotivated prospects, too many people I could never manage to make contact with.

If you’ve heard me speak about web site architecture in public, you will have heard me talk about my goal for web-originated prospects: I want to convert 100% of the people I hear from. Half of that problem consists of delivering the goods as best I can. But the other half consists of diverting or delaying the folks who aren’t really ready to do business.

If all you want is information, that’s cool. Always happy to help. But one of the reasons our sites are so forthcoming with information is that I don’t want to trouble you to have to ask for the help you want, and I don’t want to have to play peek-a-boo with you to get it to you. Realtors talk all the time about Nordstroms, but our web sites are designed to work more like Target: Shop all you want, and no one will bug you until you’re ready to make your move.

I’ve spent years building sites this way, and I won’t swear I’ve been wholly successful. But, by now, I know that if I hear from someone from one of our sites, my chance of turning that contact into one or more closed transactions is better than 50%. We’ve never been good at CRM, but we’re working at getting better, so it could be my long-term yields will go up over time.

But I am still very poor at dealing with loosely-motivated contacts. It’s obvious to me right away, sometimes from the form response itself, that I’m going to have to play cat-and-mouse, and I really, really don’t like it. It’s okay not to buy. It’s okay not to sell. But it seems less-than-okay to me to make a grand overture and then hide under the covers like a nervous bride. My job is making real estate transactions happen — not an easy task right now. The last thing I want to be is the clingy sales-creep you made the mistake of engaging.

All of which brings me to our partnering relationship with Redfin.com. We started working referrals from Redfin on March 25th and I just closed our first referred transaction on June 4th. It was my first transaction, but it was also the first successfully-closed Redfin referral in Phoenix. I don’t know how their own agents are doing, but I was in line to be first three different times, with the first two falling apart. That slow start by itself is not surprising to me. Redfin is offering referred clients 15% of the gross commission, but our experience is that no one in Phoenix cares about commission rebates. We played with this idea in 2006 and it died an ignominious death.

The transaction I closed was huge fun — a sweet woman from Missouri who looked and sounded like home to me — and I have others in the pipeline that show promise. But the burn rate is off-the-charts for us, the kind of stuff we haven’t seen since 2001. I have had referrals from Redfin that I have never once successfully made contact with — and we’re responding to these inquiries like a four-alarm fire.

The ones who are ready to act are glued on right away, no fake, no fail. But the ones who aren’t are barely there at all. It’s frustrating, but we made some lemonade out of it: Redfin’s pipeline management software is so good that I ripped-off reverse-engineered the basic concept and built our own version of it.

But our whole modus vivendi is to get folks into our universe and then keep them there, for months if necessary, only raising their hands when they’re ready to act. Quite a few of the Redfin inquiries come from people who have a curiosity about a particular house they’ve found on the site, a curiosity that may have nothing at all to do with buying that home. As with the HouseValues.com kind of form response, when they find out that filling out the form results in a follow-up from a Realtor, they’re locked into Tom ‘n’ Jerry mode. Frankly, I can’t blame them. Everything looks so automated, I’m sure many of those folks think they’re going to get an automated response.

Mind you, I’m just venting. I need to figure out how to a better job dealing with these inquiries. Redfin is hosting a webinar next week for referral agents to talk about how to get better yields. But, really, it’s just another kind of elephant-in-the-room problem. I need to take the problem head-on, to give people the kind of help they’re looking for and then move on.

And: All that notwithstanding, this has been a great experience for us so far. I get to talk to a lot of people I might not have heard from otherwise, and, not only have I successfully gotten paid, my first Redfin buyer gave us a solid 10 in her post-closing rating:

Greg was the 5th agent I worked with and the only one to listen to what I wanted. He was truly the epitome of what a real estate agent should be.

Cathleen wanted to work with Redfin because she wanted to close more transactions. I wanted to do it because I want to do what I can to undermine the-way-things-have-always-been-done in real estate. But we’ve already profited by building better tools as a result of our work with Redfin. And, soon enough, working with Redfin inquiries is going to make us better salespeople.

Related posts:
  • Redfin.com’s Glenn Kelman comes to Scottsdale to beard the MLS lion.
  • Houses Grow on Trees – Redfin Continues Quest for World Domination
  • Katy Couric, Redfin, and the Predictability of Markets.

  • 7 comments

    7 Comments so far

    1. [...] This post was mentioned on Twitter by . said: [...]

    2. Alex Cortez June 18th, 2010 12:07 pm

      Informative post, Greg. Unfortunately Redfin does not cover my market, but I would gladly enroll if they did (based on what I have read around the RE.net). I’ll have to dig deeper into their ‘pipeline management software’ to see what aspects I can incorporate.

    3. Brian Brady June 18th, 2010 2:35 pm

      Congratulations to both of you (Glenn and Greg). I watched you two flirt, 2.5 years ago:

      http://delmar.typepad.com/brianbrady/2007/10/strange-bedfell.html

      I think y’all have what could be a beautiful marriage.

    4. Glenn Kelman June 18th, 2010 5:14 pm

      Greg, I loved the history in this post — especially about the heroin addicts and the paroled murderer — and really appreciated the thoughtful analysis. We worry all the time about how to create a meaningful connection between consumers on our website and our partners. Lots of folks at Redfin read this, and I’ll recommend that more do so. Our challenge is to create a relationship of desire, not obligation, which is knowingly initiated by the consumer. What in fact we sometimes get is someone expecting no relationship at all. Part of this is just the challenge of integrating a website and personal service; part of this is because we haven’t yet figured out how to direct a website user to whatever he or she wants: be it help from a buyer’s agent, or more online information, or the listing agent’s telephone number. Our tools need to get better, and they will. Thanks for the advice Greg.

    5. jeffrey gordon June 20th, 2010 8:04 pm

      Hey Greg, great post on online lead generation!

      I was an early adopter of Adwords after completing Craig Proctors coaching program and it was an eye opener for me to see the sheer numbers of leads we generated in 2001-2003 online as well as some simple newspaper text ads–I almost used to regret Mondays as I attempted to contact 40-80 prospects interested in buying properties!

      I have invested a lot of capital and time in the last 4 years learning SEO and PPC etc, in some ways the immediate feedback of online marketing almost blinded me to some of it most obvious glaring issues!

      In he last couple of years I have stumbled across a character with huge experience in the “offline” lead gen world and he made me realize how much the “false gold” of online marketing can prevent us business owners from seeing the obvious!

      I am a numbers guy and tracked my PPC results and my CRM followup etc. quite diligently. I was always so proud that I was seeing way above average click throughs to my ad scripts on Adwords and was typically seeing 1.5-2.+ conversion to having my forms filled in and emailed to me.

      But you know what, what I seem to remember most of this period is the sheer number of new leads to try and follow up with.

      My conversion to forms filled to deals was more like 1 in 80, and that is where my lesson was so vividly confirmed working with Tommy the offline lead gen expert.

      The promise of the online marketing solution is 100′s of leads that convert at say .5% and require a lot of effort to weed through the flotsam to say the least.

      On the other hand a good print or direct mail ad combined with a phone call will typically result in 50% conversion when a good sales person is on the phone with the prospect.

      Given the system requirements and the potential costs of PPC costs/website development/SEO/CRM followup etc. it became clear to me several years ago, that I would much rather focus on getting folks to call me on the phone than sending me an email–counter-intuitive to my original vision of online marketing, but so long as the world is full of smart guys like you and Jeff Brown I am more inclined than ever to follow old school vs new school–why ignore systems that deliver vs chase new systems that fail to deliver what is promised!

      There is a lot to like about Redfin–I spent many years in Seattle and have followed them a bit–I like their property search tools and appreciate Glenn’s willingness to establish the status quo even when he is taking serious return fire.

      It would be interesting to hear what their numbers are for lead gen, my experience is that one can spend a lot of money generating leads and following them up so at some point when you burn through the venture capital (i have no idea if they are profitable today or not) you must make it profitable to survive.

      What I find most interesting about them are the systems they have pioneered for how they structure their people to provide real estate services, again it would be interesting to see how that works for them in regards to team etc.

      anyway, thanks for the report from the frontier, I am sure Glenn and crew appreciate your being on the team!

      jeffrey gordon

    6. Brian Wilson June 21st, 2010 4:56 am

      Greg, tell more about your experience about the failure of your effort to advertise commission rebates. Did it fail because it did not make the phone ring or because the people who called didn’t do the deal?

    7. Greg Swann June 21st, 2010 7:28 am

      > Did it fail because it did not make the phone ring or because the people who called didn’t do the deal?

      Crickets. Zero interest. None. I talked about this here when we did it, late 2006, and we put a lot of money behind the idea. Nada. FWIW, even now, buyers never ask me how I’m getting paid.