HouseValues Loses Big in Third Quarter

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Crappy Real estate lead-generation website, HouseValues.com says in its recent press release that it lost over $1.5 Million in the third quarter of 2006. Probably because its one of the lamest business models and websites in the known universe of market conditions, costs associated with additional support staff, and the increased cost of marketing.

Look, here’s the thing about HouseValues. It is a lead generation tool that deceives the public into thinking they are getting free information about the value of their home, but really just collects their information and sells it to the highest-bidding real estate agents. And it’s not like they give the consumer’s information to a highly-trained and qualified Realtor that has passed a thorough screening process. No, they just sell it to whoever will pay.

Do they qualify these real estate agents to make sure that they are good, hard-working, decent people? No.

Do they check for the qualifications of the agents? No.

Do they care at all about the agent, other than their ability and willingness to pay for the leads? No.

I’m not saying that it is their responsibility to. They developed a company based on a need and they have grown very fast because they filled that need. What I am saying is that the company sucks and nobody should pay them for leads, but instead spend their money marketing themselves and generating their own leads. And do it with some integrity.

What made HouseValues successful was their recognition of the fact that most real estate agents/brokers were way behind the times with using the internet to attract consumers, turn those consumers into leads and those leads into sales.

What will cause the company to ultimately fail is the fact that as brokers slowly embrace the potential in the Internet and continue to create tools that are better, and as the public becomes more aware of these sorts of practices, the amount of leads generated by these types of whore-companies disintegrate. And the industry as a whole and the entire general public is better off for it. Who better to design information portals for real estate consumers than real estate companies and their clients?

Update (11-10-06)- See Andy Denton’s post about this same topic.

When a real estate site has lead generation as it’s focus, the consumer will not be served well. But if the focus of the website is to give the best tools and information available, then the consumer is taken care of first, and there will be plenty of ways to make money once the consumer is taken care of. Goole did it, MySpace did it, YouTube did it- and that’s why they became embraced so quickly and have become so successful. Obviously not all websites will be as big, but wouldn’t it be great if more sites took that approach?

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23 thoughts on “HouseValues Loses Big in Third Quarter

  1. Good thing that – here in North America at least – we still live in a democracy. Any fool (Ooops, uniformed person) can post any nonsense on the web. Nothing of what Greg writes about could further from the truth. I have personal experience dealing with HouseValues, and I have found nothing but professional and truly dedicated service towards the realtor.
    HouseValues does not deceive the public. Go into their website and look at the forms the public sees. At the bottom of the page, you will see a BIG BLUE button clearly stating that this information will be forwarded to a realtor. The information given is TOTALLY FREE to the public. And there is more!. The first thing the realtor does is send an email to the prospect announcing she has received the prospect’s request from HouseValues.
    Following Greg’s distorted rational, once a prospect realizes that a realtor has responded, most of them would probably say “thanks but no thanks” and stop right there.
    I have never had a prospect do this to me.
    Are all the agents qualified and screened by HouseValues? They are, but no more than the FAA screens every commercial pilot. If they do, how do you explain that the MAJORITY OF AIRCRAFT ACCIDENTS ARE PILOT (or human) RELATED.
    Every single state in the U.S. is in charge of regulating medical practitioners. Then why do we have so many (thousands) of MEDICAL MALPRACTICE LAWSUITS?
    Do I make my point?
    I could go on but I really have better things to do. The perceived problem realtors have with HouseValues is simple. Most realtors are still living in the “50’s”. They simply do not have the foggiest notion of how to deal with the Internet Consumer. Therefore, they cannot get the HouseValue (or anyone else’s) leads to work for them.
    To all of you disgruntled realtors, I say this: go and read books such as “Permission Marketing” by Seth Godin, and perhaps you might stop complaining.

  2. John,
    I have no doubt that HouseValues has a disclaimer saying that an agent will contact the consumer. But that doesn’t change the fact that HouseValues is a lead generation company.
    Note- Not a client-services company. Not a brokerage that places it’s focus on serving home buyers as they search for homes, and with the escrow process to ensure they are protected. No- it is a lead-generation company, plain and simple.
    It’s entire focus is to generate as many leads as possible so it can then sell them to whoever will pay.
    Completely different than placing your focus on representing people. If agents spent their money on marketing instead of these sort of lame lead-generation farms, everyone would be better off.
    Good luck in your business

  3. Greg,
    I do not know if there is anyone out there offering “Reality” courses. If they are, you should sign up immediately. Also, I see you are not a practicing realtor. I am, and have been for thirty years.
    My comments are based on real-life experience. They do not come from reading about it on the internet.
    Realtors IN GENERAL are unmotivated low-tech kind of people. How do I know? I have worked with them for 30 long years!
    Realtors will never develop the knowledge and expertise to compete with deep-pocket lead generation companies.
    What you are talking about is an ideal world located in Florida near Disneyland. That world IS NOT REAL.
    Let me enlighten you a bit more about realtors and their lack of marketing knowledge. A recent survey by NAR (National Associations of Realtors) has found that 79% of realtors use the printed media to attract buyers. Yet the same survey found that 78% of buyers use the web to locate a home!
    Do you see the discrepancy? Realtors IN GENERAL are “not with it” and never will be. The reality is simple: Entry into the industry is too easy, and no single state in the U.S. or province in Canada is helping this situation.
    If you can pass a few simple courses, you are legally able to handle people’s most valuable asset. No technical, financial, business or people skills required!
    Housevalues is lead and marketing firm that helps realtors achieve what MOST of them are unable to do on their own.
    My prediction is that in a few years, the only realtors still in business will be buying leads and marketing services from Housevalues-type companies.
    Perhaps I should set-up a new real estate company – “Nirvana Real Estate Services”. To work here you do not need to have any skills, all business is served to you on a silver-plater, you can work part-time, and best of all, you can easily earn a MILLION DOLLARS in your first year in business. Join us today!

  4. John,

    When you comment, type in your website or blog, so we can see who you are and then we can have a more open discussion.

    Your point, “Realtors IN GENERAL are unmotivated low-tech kind of people. How do I know? I have worked with them for 30 long years!
    Realtors will never develop the knowledge and expertise to compete with deep-pocket lead generation companies”

    My origianl post says,

    “What made HouseValues successful was their recognition of the fact that most real estate agents/brokers were way behind the times with using the internet to attract consumers, turn those consumers into leads and those leads into sales.”

    It’s almost as though you are saying the same thing…

    PS- I have been a Realtor for fourteen years and am still a practicing Realtor.

  5. Greg,
    I am surprised that after learning you ARE a realtor, you could have such misguided opinios as to realtors ability to go on the web and create a lead generating vehicle. Most of them, today, will not even answer an email! That’s how “clued-in” to the times most realtors are.
    We are saying the same thing, but… I would not ever call someone I disagree with a WHORE. It does not add anything positive to your character.
    What makes our society work is that we can disagree in a civilized manner. Otherwise we end-up with a situation similar to the midle east, where each person with a different belief wants to exterminate those who believe differently.
    Vive la difference!

  6. John,

    If my calling HouseValues a whore-company offends you , you may want to skip this blog and go on to the next because you’re gonna be offended a lot.

  7. Greg,
    I am not the least offended. Did you see me say that?
    What I am saying is your character is at stake. You can say anything you want, but IT DOES REFLECT ON YOU!!!

  8. Pingback: AndyDenton.com » Blog Archive » Realty Lead Generators: Let the window shoppers shop - Family, Friends, Online Real Estate

  9. John,
    If HV worked for you, then you’re a cut above the rest. How many closings did you accumulate? And what was your close percentage?

    I’d be very interested to hear. Thanks! 🙂

  10. Hi Denton,
    I will be glad to tell you about the sucess I and others have had with Housevalues. I am NOT a cut above the rest. What I am though is a very avid reader of trends and marketing. The MAJORITY of realtors are not.
    I am quite busy right now so I will get back to you shortly with more details.

  11. Pingback: Consumer Beware: Some Housing Information Has Strings Attached « S.E. Michigan Real Estate

  12. Pingback: Consumer Beware: Some Housing Information Has Strings Attached « S.E. Michigan Real Estate

  13. Greg,

    I think maybe if HV were to have been described as a company of negotiable affection your character wouldn’t be under such scrutiny!

  14. Andy,
    After investigating Housevalues for two years and talking to a number of realtors, I decided to sign-up this past July. I have made three sales directly related to Housevalues. My return on investment so far is better than seven hundred percent. Clearly, this figure will go down as I receive more leads and I nurture them to maturity.
    In a way, I have been fortunate, but I know many other realtors who have had similar results. A good friend in my market area gets about sixty-five percent of her business from Housevalues leads. Last year she closed more than forty-eight sales.
    The key to succeeding with internet leads, be it from Housevalues or the agents’ own website, is to understand the cycles and the incubation process they all need. Today’s consumer enters the search-finding stage much earlier than before the internet became what it is today. In some cases, buyers star looking for a home as long as two years prior to buying. Sellers use a similar time frame.
    The trouble many realtors have is, they fail to understand this fact or attempt to handle internet consumers the same way they dealt with consumers before the internet. It simply does not work.
    The internet consumer is fiercely independent. She wants control of the process and frequently will not identify herself to the realtor.
    Therefore, many realtors often receive inquiries from “Mickie Mouse, Pluto, or John Doe at 123 Main Street.
    Unfortunately for them, many dismiss these leads as “phony”. What the realtor does not understand is that this prospect is not ready to reveal her true identity…YET!!!
    The internet consumer wants total anonymity in the initial fact finding stage and no amount of pressure or coercion will make her identify herself or her true needs.
    Having said all this, and in view of such intense competition in our industry, we need to have not one or two lead sources, but a number of them.
    I believe much of the negative comments from realtors about lead generation companies stems from the fact that the realtor has “paid big bucks” for these leads and is not seeing enough results.
    We can no longer have any level of success in real estate without having at least five different sources of buyers and sellers leads. Internet leads should be part of the realtor’s lead-generating strategy, but they should not be the ONLY source.
    Hope this helps.

  15. John C,

    You are right about one thing – converting online leads into sales is a skill. There is a cultivation and incubation period for online leads, and sadly most lead buyers (realtors) do not possess these skills – nor should they. Their profession is real estate.

    As a whole, realtors are a technology ignorant group of professionals. Their understanding of technology is growing, but still very low.

    Agents and brokers need to realize that these leads close at or below a 2% rate. If most agents knew these historical numbers, along with the invested time it takes to close each lead, my guess is that not many agents would agree to play ball with lead gen companies like HV. Their efforts are better spent elsewhere.

    For the average agent, rather than working tirelessly to cultivate internet leads (as they are currently provided to the agent), i would venture these same efforts would result in more closings if the agent were to focus on their sweet spot markets – family, friends, and walk-ins. There’s something to be said about working with unwilling strangers versus willing acquaintences and active buyers/sellers.

    For the lead gen companies to succeed, there needs to be a better value proposition for the agents. Swimming the deep waters of the internet with open nets, capturing everything in sight, then selling the chum off to agents for them to weed through doesn’t make for a lasting business model. They need to be working with dolphin-safe nets.

  16. Andy,
    Again, I find that there is a lot of misinformation floating around in our industry. Realtors SHOULD develop marketing skills. Selling homes is only one part of the equation. Are you suggesting that realtors ought to sit in their offices waiting for buyers and sellers to call them?
    Any professional needs to develop a whole set of skills apart from the most obvious ones. Especially if they expect to get paid big bucks for their services.
    A top prosecuting lawyer has a firm grip on all aspects of the law. She has also developed an acute sense of observation, and a very powerful set of persuading skills in order to move the jury to her point of view. She has also spent a long time marketing herself to the media and others.
    This is true for attorneys, accountants, medical specialist, or any other so-called true professional. Are most realtors true professionals? Just ask the public. Realtors usually rank slightly higher than used-car salesmen in all opinion polls.
    Craig Proctor, one of the top 10 Remax agents in North America for the last ten years, will disagree with your 2% conversion rate. He should know. He and his team sellmore 500 homes a year!!! So will most other top producing realtors in the U.S.and Canada.
    The actual conversion rate after one year is closer to TWENTY percent. This does not mean that one realtor will get 20 percent of that business. What it does mean is that 20 percent of those “suspects” turn out to be somebody’s client after one year.
    You are absolutely correct when you mention family and friends. But here again, most realtors (myself included) fail miserably at staying in touch.
    NAR conducts regular surveys about the real estate industry. In one of those surveys, NAR found that most sellers were happy with the realtor they had used. The problem was that about 68 percent of them could not remember the realtor’s name. After the sale, the realtor had moved on looking for new clients.
    Most of our industry’s so-called problems are due to OUR OWN FAULT. It takes a big person to recognize this, but I guess we do not have many BIG (character wise) realtors willing to admit it. The truth is just too painful.

  17. John C,

    All I’m trying to say, is that online lead generators need to do a better job of serving their customers. Leads need to be better cultivated. Their value proposition for the agents has to improve.

    The majority of agents are cash poor. Having to pay hefty recurring monthly fees for the hopes of a closed transaction has to be taxing for the typical agent.

    The agents deserve better leads than what they are currently being sold. The lead gen companies can do a better job of cultivating these leads, and they know it.

    But, cultivating leads means a lower lead volume, thus the less amount of leads they have to sell, thus means lower revenue. Where’s their incentive to improve? It’s do or die in my mind.

  18. My position is about what is good for the consumer. HouseValues and other lead-gen sites should disclose to the consumer what their model is. Have some integrity around what they are doing.

    If you have a television commercial that says “Come see what your home is worth on our website.” and consumers go there and fill out their information thinking they are going to get a value for their home, and instead have agents calling them because their personal information was sold- that’s a crappy model to me.

    It’s not about if John or some other agent can get some business from it. A lot of people make millions of dollars sending out millions of email spam messages every day. Their capture rate is low but some people actually do click on their links. We can discuss how they can increase their capture rate and they can yack about how much money they make from it all day, but in my opinion it’s a crappy business model. And so is HouseValues.

    PS- Craig Proctor gets his leads from his websites, past clients and his radio ads, not from HV.

  19. Greg,
    My point was Craig’s leads are Internet leads.
    As such, they need cultivating. His closing ratio is infinitely better than the two percent Andy mentioned.
    I do not know whether he buys leads from HV or not. He never did share that with me.
    Craig Proctor works in my market, and I have learned tons about what works for him and what does not.

  20. Pingback: Add value, then dollars « Marketing to Investors

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