What Is A Lead?

Posted by: Jessica Gopalakrishnan on January 15th, 2009

Posted on behalf of Peter McCullough, Real Estate Training Specialist at HomeGain.

“A sales lead is the identity of a person or entity potentially interested in purchasing a product or service, and represents the second stage of a sales process. For a sales lead to qualify as a sales prospect, or equivalently to move a lead from the process step sales lead to the process sales prospect, qualification must be performed and evaluated. Typically this involves identifying by direct interrogation the lead’s product applicability, availability of funding, and time frame for purchase. If a sales lead eventually makes a purchase, this is called conversion and a closed sale. The ratio of sales leads that convert is often referred to as the conversion rate, a way to measure the effectiveness of a sales process, sales team, or sales person.”

OK. This is straight from Wikipedia.com. It is a straightforward description of a lead and it is relevant to the real estate community. However, I feel an analogy would help further reinforce what a lead is.

Everyone is familiar with the famous detective Sherlock Holmes. As well as real estate agents, Sherlock required leads to solve his cases and close them. A lead pointed him in a specific (or vague) direction. It was not necessarily the solution to the case, but it gave him something to pursue.

Real estate related leads are the same. They are not a closed deal; they point agents in a direction and give them something to pursue. In Sherlock’s situation, he could not afford to sit on the information contained in a lead; time was of the essence. Such is the case for real estate leads.

A lead must be pursued immediately. The information has to be verified to make sure the lead will take you to the next step. Real estate leads must be qualified to see whether or not it is worth the time to pursue.

Once the qualification process is complete (or at least begun), the next step becomes clear. For a real estate lead, the agent needs to determine if the prospect (or lead) is genuine, when they are looking to transact, if they have realistic expectations about the purchase / sale of a home.

The agent can also determine if the prospect is pre-qualified in the case of a buyer. They can find out if the seller has any experience in a home sale. They can gather specific additional information regarding the physical state of the property, work out legal issues, price ranges, etc.

Each step, each bit of information gathered about a lead, and then prospect, will point the agent to the next step and eventually to the closed transaction. This shows the necessity of obtaining leads to maintain a constant flow of business.

However, a lead must be viewed by factoring in industry conditions. In a buyer’s market, buyers will be more motivated than sellers. Conversely, sellers will be more motivated in a seller’s market.

In a tough credit market, even a motivated buyer will have issues which will ultimately affect the seller as well. With a high number of foreclosures, the perspective on home buying changes. Agents’ strategies should change as well.

So, when an agent receives a lead, even prior to qualifying that lead, they should consider current market conditions to get a better feel for consumer confidence (or lack thereof). The agent should determine what type of solution will best fit the buyer or seller’s situation.

Having done that, the agent will then know what type of qualifying questions to ask leads or prospects.

If the agent is in the business for the long haul, a lead is simply one notch in the pipeline. An agent should constantly be acquiring new leads to keep the pipeline filled. A gap in the pipeline correlates directly to a gap in paychecks.

Good lead, bad lead? A lead is a person. A good lead or a bad lead is a reflection of that person. If the person is afraid of market conditions, they will not be as motivated to transact. Does that make it a bad lead? Not necessarily. It may simply be a longer term lead and will need more pursuit and follow up.

Will a single contact with a lead or prospect close a transaction? Maybe, maybe not. It depends largely on current market conditions, and luck. Consumers will require more hand holding, more confidence in their agent than in years past.

Follow up with a lead or prospect is an art. The intervals between “touches” must reflect the lead’s situation. If a seller decides they want to transact in 12 months, the agent should not follow up on a weekly basis. However, leaving too much time between touches may permit another agent to enter the picture and potentially take the business away from the original agent.

So, from acquisition of the lead through to the close, pay attention to leads – these are your future clients. Build their confidence in you and your organization. Offer them solutions which fit current market conditions. Then, your leads will represent closed transactions, not simply wasted time, expense and effort. Make Sherlock proud; acquire and pursue your leads!



3 Comments on “What Is A Lead?”

myrtle beach condos

good post i don’t think many agents understand exactly what a real lead is

Louis Cammarosano

Thanks peter
I view leads as valuable connections,not potentia instant transactions.

If viewed this way and the right connection is made instead of getting an answer to the question “are you ready to buy” a lot more might happen including getting the person to work with you.

Leads are often disgarded if follow up is required. Too often realtors toss aside “leads” that are not ready to transact now. There is opportunity in those not ready to transact now.

One day they probably will be and if you make a good impression rather than showing your real life disgust or lack of internet follow up, you’ll never work with that person.

Even more importantly, forming a connection with a “lead” will also increase your chances that you will get referrals. After all one way of standing out among other realtors is going out of your way to help even those “leads” that are not ready to transact.

By doing so you increase your good will and repuation and that in itself is valuable and will eventually lead to business.

Kevin Sandridge

Jessica, I really enjoyed this post. Seems like most folks put a system in place for contacting and following up with leads under a “one size fits all” scheme.

I really like one of Seth Godin’s recent posts on Emails and making them more personal. This syncs up with what you’ve said here – I believe – about gauging each prospect or lead’s temperature. Missing the mark when connecting with a lead can kill not only that particular deal, but future ones that may have come from that lead’s referral stream as well.

More attention needs to be paid to the specificity of each lead and the best way to deliver to them that certain “Platinum Rule” style service so many other Realtors and Mortgage Professionals are simply failing to provide.

Forget going the extra mile… most of the time just going a few extra feet through some careful planning and personalization can boost us past our competition.

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