Every year, real estate agents worldwide leave significant revenue on the table without even realizing it. The primary culprit? Lost leads. Any agent with at least a year of experience has likely accumulated hundreds of these.
But what exactly are "lost leads"?
They are potential clients who initially showed interest in buying or selling property but, for various reasons during the process, did not complete a transaction. Common issues include high rates, loan approval failures, or changes in financial circumstances. For legitimate reasons, these leads were not able or interested in proceeding at that time.
Over time, these leads accumulate, forgotten in the dusty corners of spreadsheets and CRM lists. Human nature often discourages following up with someone after a rejection, especially as time passes.
However, as market conditions and personal circumstances change, some of these lost leads may re-enter the market. By not consistently reaching out, agents keep sitting on a gold mine.
How many lost leads does the average agent have?
According to the National Association of Realtors, the average national conversion rate for leads ranges from 0.4% to 1.2%, with an average of 0.8%.
The typical agent handles around 1,500 leads annually to achieve an average of 12 transactions.
How much money is missed due to lost leads?
Conservatively estimating, perhaps only 500 of these 1,500 leads were ever serious potential customers, now considered "lost" leads. Assuming a modest 5% of these "lost" leads return to the market, that's 25 additional interested leads per year that go uncontacted.
This oversight could equate to at least one extra sale per year, which, based on average commission data from the National Realtors Association, could mean up to an additional $4,700 annually—money that agents are currently missing out on.
The Sphere of Influence argument
All agents are taught, either by their mentors or through online resources, that a successful agent is one who builds a rich Sphere of Influence (SOI). This has been proven time and again; real estate is a business of relationships and personal connections concerning people's homes, rather than a regular sales job.
Some agents might argue that with a solid SOI, there is no need to revive old, "lost" leads. However, this argument overlooks a crucial reality: every agent is at a different point in their career, and not all SOIs are equal.
A very small percentage of agents, less than 5%, are fortunate enough to cultivate an SOI comprising recurring investors or luxury buyers, which might eliminate their need for extra transactions each year. However, these cases represent only a small percentage of agents. Most do not have the luxury of an SOI that can sustain their income over a lifetime; instead, they must work in conjunction with brokerages to regularly acquire new leads to survive.
It is well-known in business that it takes approximately five times more effort to convert a new lead into a sale than to re-engage a past lead. The reason can be summed up in one word: rapport. An agent will likely have an easier time converting a lead with whom they have previously interacted compared to a completely new lead.
Yet, despite this fact and supporting empirical data, many agents choose to chase new leads and neglect old ones, instead of pursuing both.
TL;DR: Agents are potentially missing out on 1 to 2 additional sales annually by not re-engaging with former leads who were not the right fit previously.
Check out part 2 of this series where we will explore what can be done to revive the lost leads and not leave cash on the table.