Online Lead Reform

Jan 23

When we hear industrywide chatter about reform, we now instructively connect with the current nationwide lawsuits toward definite compensation reform over the next 18 to 24 months. There is another significant change that will take place in our industry that could be as impactful, which is the new FCC ruling for online lead generation. This ruling reforms the way we do business, and it's important to understand what it means for us.

Here is the background:

The Federal Communications Commission (FCC) has recently announced pivotal changes poised to revolutionize the real estate industry. These adjustments will mandate significant alterations to the lead generation processes utilized by real estate enterprises across the nation, profoundly affecting the foundational business strategies of major players like Zillow and Realtor.com, along with other businesses dependent on their lead generation services.

The impetus for reform stems from the rampant escalation of mass market lead generation, which has derailed considerably our industry, perception, and trust. To put this into perspective, consider that this year alone, roughly 150 million leads were produced within the United States' real estate sector, yet resulted in less than five million actual transactions. Recognizing the disparity, the FCC has revised the Telephone Consumer Protection Act (TCPA) regulations to seal prevalent loopholes exploited by lead generators, aiming to significantly curtail the consumer burden of unsolicited contact — a change universally welcomed, as everyone desires fewer interruptions by spam.

At its heart, the real estate business thrives on personalized service — building and maintaining direct, one-on-one relationships and earning referrals. However, the trend for decades has leaned heavily on the convenience of mass-produced leads from large online portals, often at the expense of these personal connections. The recent change enactment by the FCC is a strategic step toward reinstating the traditional values of the industry, encouraging a shift back to a model that prioritizes personal engagement and relationships in real estate transactions.

The Impact of the FCC Ruling:

The FCC's recent decision is set to dramatically transform the landscape of lead generation in the real estate market, starting in 2024. The upcoming changes are summarized as follows:

The cost of acquiring new real estate leads is projected to surge. Enforcement actions commencing this summer are expected to substantially shrink the volume of new leads available in the market.
A strict policy against lead sharing will be implemented. The prevalent practice of distributing the same consumer's information to multiple real estate agents will be outlawed. This practice, which currently allows a single lead to be shared with 3-5 agents, will soon be a thing of the past, resulting in a scarcity of leads and an increase in their cost.
A new standard for consent will be introduced, demanding organizations obtain explicit and individual consent from each consumer prior to any contact. This will eliminate the practice of using vague, blanket consent gathered through mass marketing efforts.
Consent must be relevant and specific. It will only be considered valid for services that match the consumer's initially indicated interests. Consumers will be mandated to choose a particular realtor by name to represent them, thereby ensuring that engagements are directly aligned with their needs.

For professionals in the real estate business who have always prioritized personal relationships and referrals, this change is a positive development. It reinforces the importance of one-on-one interactions that have been central to their operations. Conversely, for those who have relied heavily on the generation of leads en masse, this ruling represents a significant and immediate shift in strategy. It underscores the need to adapt swiftly to a market that now demands a more personalized approach to client engagement.

Here is how both the industry and the consumer win:

Lead saturation: this will end the misuse of many online lead portals with the claim of “exclusive” leads, first-to-claim, or resale practices. We have all experienced and read about the penalties most of the large portals faced with the mass resale of leads, the resale of exclusive leads to more than one subscriber, or the repackaging or resale of leads with the same key data points but different "packaging.”. We saw online portals “misremember” the distinct difference between exclusive and spam, which will now change despite past violations, penalties, and violations admitted to this oversight (see below for a short list).
One-to-one consent will strengthen the consumer experience and conversion metrics. Moving away from the torment of being believed to be the first to call but actually being the 6th, this now allows a stronger dialogue with the lead. Moving conversations to “I am responding to your direct request…I am your exclusive, only, and direct contact from this point on” will create the trust, value, and consumer buy-in that we all seek. Let’s hope this change bleeds into other industries such as credit reporting and trigger leads.
Reduction in anxiety and fear—as consumers, we all fear the opt-in box! Will this unleash a barrage of calls, emails, texts, knocks on my door, and certified mail? Consumers who opt in will how strong assurances that regulation will reduce this tidal wave fear…and better yet, we can use it to our advantage as we proactively discuss it with our leads. Defining and describing the intention of how we plan to communicate in the future and our best practices with our leads will help provide a more predictable sales process, translating to less fear and more trust.

As residential real estate compensation reform grabs our industry headlines, do not let online reform slip under our radars as an opportunity for us to prove why this reform is better for the consumer experience and our business opportunities. Reform will be the major theme for our industry over the next 24 months…let’’s leverage it to strengthen our relationships, perception, and strategies.

Past Penalties:

Zillow Group, 2014: Fined $5 million for misleading consumers about the exclusivity of their leads and for deceptive advertising practices. The FTC alleged that Zillow misrepresented the leads as "exclusive" while selling them to multiple agents and also misled consumers about how their contact information would be used.

Trulia, 2013: Fined $3 million for similar deceptive practices as Zillow. The FTC alleged that Trulia misled consumers about the exclusivity of their leads, the number of agents who would receive their information, and the control they had over who would contact them.
Homesnap of California, 2019: A California jury ruled against Homesnap, finding that they deceived agents into believing they were purchasing exclusive leads when, in reality, the leads were shared with multiple agents. The jury awarded $48 million in damages to affected agents.
Zillow Group, 2017: A class action lawsuit was filed against Zillow, alleging that they misled consumers about the exclusivity of their leads and sold their information to multiple agents without their consent. The lawsuit is still ongoing.
Homesnap of California, 2019: Following the California jury verdict against Homesnap, multiple class action lawsuits were filed against the company by both consumers and agents. These lawsuits are also still ongoing.