Online Leads are about to change!
Reform is now underway within the Real Estate Industry that will unfold over the next 18 to 24 months. A pivotal shift is anticipated with the new FCC ruling on online lead generation, reshaping our business practices significantly. It's crucial for professionals in the industry to grasp the implications of these changes.
The Federal Communications Commission (FCC) has announced major changes that are set to revolutionize the real estate sector. These changes will mandate a comprehensive overhaul of lead generation processes used by real estate enterprises nationwide, affecting the foundational business strategies of key players like Zillow and Realtor.com, as well as other businesses reliant on their lead generation services.
The need for these reforms has been driven by the unchecked growth of mass-market lead generation, which has significantly affected the industry's reputation and trust. To illustrate, last year alone, approximately 150 million leads were generated in the U.S. real estate sector, yet fewer than five million culminated in actual transactions. Recognizing this disparity, the FCC has updated the Telephone Consumer Protection Act (TCPA) to close widespread loopholes exploited by lead generators, aiming to drastically reduce consumer exposure to unsolicited contacts. This move has been broadly welcomed, as it promises fewer interruptions from spam.
Historically, the real estate business has thrived on personalized service—fostering direct, one-on-one relationships and earning referrals. However, the trend has increasingly leaned towards mass-produced leads from large online portals, often at the expense of personal connections. The FCC's recent changes mark a strategic return to the industry's traditional values, emphasizing personal engagement and relationships in real estate transactions.
Impact of the FCC Ruling:
The FCC's decision is poised to significantly alter the landscape of lead generation starting in 2024:
Increased Costs: With enforcement actions set to begin this summer, the cost of acquiring new leads is expected to rise sharply, as the available volume of new leads diminishes.
Prohibition of Lead Sharing: The common practice of distributing a single consumer's information to multiple real estate agents will be prohibited, ending the current model where one lead might be shared with 3-5 agents. This will result in both lead scarcity and increased costs.
Stricter Consent Requirements: Organizations will need to secure explicit and individual consent from each consumer before making contact. This will eliminate the practice of using vague, blanket consent obtained through broad marketing efforts.
Relevant and Specific Consent: Consent will only be valid for services that align with the consumer's initially indicated interests. Consumers will need to specifically name a realtor to represent them, ensuring that engagements are directly tailored to their needs.
How the Industry and Consumers Win:
End of Lead Saturation: This change will curb the misuse of many online lead portals which have often ambiguously offered "exclusive" leads that were neither exclusive nor fairly distributed.
Enhanced Consumer Experience: With the requirement for one-to-one consent, the consumer experience and conversion metrics will improve. This will foster stronger, more direct interactions with leads, enhancing trust and consumer buy-in.
Reduced Anxiety: Consumers who opt in will have stronger assurances that new regulations will mitigate the barrage of unwanted communications. This, in turn, can be leveraged proactively in discussions with leads to outline communication intentions and best practices, promoting a more predictable sales process and building trust.
As the industry continues to focus on Residential Real Estate Compensation reform, it's vital not to overlook the significance of online reform as an opportunity to enhance the consumer experience and expand business opportunities. The theme of reform will dominate our industry discussions over the next 24 months—let's use it to strengthen our relationships, improve our reputation, and refine our strategies.
Past Penalties:
Zillow Group, 2014: Fined $5 million for misleading consumers about the exclusivity of their leads and for deceptive advertising practices.
Trulia, 2013: Fined $3 million for similar deceptive practices.
Homesnap of California, 2019: A jury awarded $48 million in damages for deceiving agents about the exclusivity of leads.
Ongoing Legal Actions: Several class action lawsuits remain pending against major players like Zillow and Homesnap, underscoring ongoing legal challenges and the need for reform.