I don’t know how many of you on this site have dealt with HouseValues as one of their subscribers but I saw some recent postings on the RE/MAX International message board (RE/MAX agents only) where they were getting hammered by agents for what they saw as predatory practices, lies, and now combative collections processes. Having written them off some time ago I am curious what others in the industry think of them and their business plan. I get their concept but I think their execution is heavily flawed – particularly when they hire lots of folks without training them on what life as an agent is like – particularly as it applies to how an agent is compensated.
[photopress:684401_buy_a_house.jpg,full,alignright]I’ll give you an example of a pitch I was given a couple of years ago, I’ll paraphrase it for brevity:
(salesperson) We don’t have the territory that you’re interested in available at this time but the whole Eastside has recently opened up.
(me) Oh, really, how many areas?
(salesperson) There are about 9 areas that one person had but he’s dropped all of them as of a few days ago.
(me) Hmm. That’s interesting. Do you know why he dropped them all? Oh, and how much were you charging him per zip code?
(salesperson) [she gives me the numbers but I’ll tell you they added up to over $5000 per month] I don’t know WHY he dropped them all because he made around $100,000 in commissions on these territories in the past year. However, he was using about 15 credit cards to pay for them all.
(me) Do you know what firm he was with and how long he’d been an agent?
(salesperson) Yes. [she tells me the firm] He was a new agent, maybe one or two years in the business.
(me) Ok. I can probably tell you why he dropped them all. He’s likely gone bankrupt.
(salesperson laughs)
(me) No. It’s not funny – if the guy owns a house he’s probably being foreclosed on now.
(salesperson is now very quiet and listening intently)
(me) The firm this guy works for likely has him on a split commission schedule. For our purposes let’s say he’s on the high side of a new agent split and he’s got a 60/40 going on. You say he’s made $100k on his leads from HV so if he is giving $40k to his broker and he’s only got $60k and he’s got to pay your firm for roughly $60k in lead generation he’s not got $0. And we haven’t even accounted for his quarterly taxes that need paying, his other out of pocket expenses or the cost of interest on those credit cards he’s using to pay for all of this. That poor SOB has probably lost everything or is about to.
(salesperson) Wow. I didn’t realize that’s how agent pay works.
(me) Well, it’s not the same in all cases but it’s common with new agents. Your firm should be training you on the various models so you guys (meaning salespeople) understand what you’re dealing with when you talk to agents and so you can have an intelligent conversation with them about what the long term contracts mean to them. I also HIGHLY recommend you never tell that story again – this poor guy is not a success story for using your program.
This was a REAL CALL I had with a HV salesperson in summer of 2003 before they went public. I had an investment firm contact me several times asking me what it was like to work with HV (I did use the service briefly and dropped it after realizing it was still too early to adopt the program because of kinks in it and the service/leads wasn’t great for what you pay), I told them what I thought about the service and I told them this story. I don’t believe in complaining for the sake of complaining. When me and the VC guy talked I gave him feedback that was clear and had good business basics behind it and how I related that to HV’s model. Basically, I told him that they’ll just churn through agents as long as there are lots of newbies in the industry that aren’t told to steer clear of them and there are plenty of those. With over 1,000,000 REALTORS(R) alone you’ve got a big pool to go after.
[photopress:leach.jpg,thumb,alignleft]Most stockholders (meaning the public) don’t know much about the inner workings of real estate compensation either so they’ll think there’s plenty of blood to suck so they’ll buy into it regardless of market highs or lows. Heck, they’ll likely get sold on the idea of HV because they’ll think that in a hot market we’ll need leads to compete and in a slow market we’ll need leads to survive. Whatever. While a few have done okay with the HV program (and good for them!) overall I consider it a less than adequate lead provider to agents on whom whose back they ride on and depend since the service is free to the public who uses it.
I had similar experiences with HouseValues. I spent over $1000/month for my 1 year contract (which they are VERY protective of and don’t give any slack when the “leads” turn out to be worthless). I also was contacted by a VC guy and told him my opinion of the company and it’s lack of quality leads. I still have not received any income at all from any of the leads I received from HouseValues. Not a single sale.
I eventually negotiated VERY hardball to get a reduced contract, and then I took it a step further and paid their 50% early contract termination penalty (i.e., I had to pay for 50% of the entire remaining cumulative contract costs to get out early without them bringing legal action against me, which they clearly threatened me with if I just stopped paying for the subscription each month). I figured paying 50% was better than 100% since it was all sunk costs of zero value.
During this time, I happened to have my credit card number stolen (not related to HV) and had to cancel my card account. As a result my final penalty payment was not paid since my billing was on auto-payment and I had just put the process out of my mind. Instead of having the simple courtesy of a single phone call letting me know that there was a problem with payment, they immediately sent my account to a collections agency with ZERO advance warning or notification of a problem. They threatened to put it all on my credit score records if I did not pay immediately within one week. I gave them my new credit card number immediately that day and HouseValues is now just a bad expensive experience that is behind me. A couple other agents in my office have used them and all have gotten out of the program, too.
I’m sorry to hear you also had a bad experience with HV although I’m not surprised it is what your experience ended up being. The firm supposedly was started by a former real estate agent so it’s difficult for me to give them any slack because this guy should know what it’s like for agents and rather than learning to work well with agents and truly making his company successful his sights are all set on the idea of making a killing on some stock options and C-level pay. There are so many companies that rely on agents for their business it’s sad especially since many of those business models are built on us continuing to have a high turnover rate.
Hi Reba,
I taught a clock hour class called “Lead Generation” in December. We had about 25 agents there. This was the first time out teaching the class so I never know what I’m going to get. We had mixed reviews from the Realtors in the room on House Values. The agents who used HV and rated it good reported that it takes a LONG TIME to incubate the leads, 12-18 months but that the leads do eventually turn, if you continually contact them.
Hello,
I have used HouseValues and JustListed for 3 years now with great success. Yes, the leads generally take awhile to turn into transactions, but we are finding that with all internet leads, not just HouseValues. I have taught several classes on internet lead generation, and some specifics ones on HouseValues (in my market center, to help fellow Housevalues agents) and found that most people were not working the system. The thought was almost the lead was suppose to be done deal. It is a LEAD, you have to work it. The best way being face to face contact. I have to wonder how many of the agents that have said here they had no luck with the leads were hand delivering their CMA’s? I find that until I do that, the lead believes I am just a computer response and not a human. If one of you is currently with HouseValues, I would be happy to give you some pointers and help you out.
I wrote a blog post yesterday on my blog with regard to the massive layoff that HouseValues recently did. Essentially their business model was flawed from day one. Considering the average close ratio of 2% on internet generated leads and an average cost of leads being around $50/lead. 50 leads would cost $2500. If the average sale is say $300,000 with a 3% SOC of $9000 commission the advance referral fees would be over 25%. As was pointed out this is post split with the office you are with, so assuming a 60/40 split and the agent pays the 25% off of just their side, the agent net is only 35% not including all of the hours necessary to cultivate 50 leads to get one and then the showing, negotiation and whatever else is necessary to get the deal to close.
I do have more commentary on http://www.glennsanford.com/