The Real Deal New York

Burner phones, fake buyers and stolen customers: When lead generation goes wrong

The practice of buying clients online is in the spotlight after Premier Agent. But what happens when things don’t go according to plan?
By Will Parker | January 10, 2018 07:00AM

Photo illustration by Lexi Pilgrim for The Real Deal

Nathan Horne was simply calling to confirm a pre-arranged meeting. The Corcoran Group agent had bought a lead online, from a company that fed him names of people looking to buy or sell a home and set him up with a day and time to visit the client.

But when Horne made the call, he learned the person on the other end wasn’t interested in doing business. He was instead a police detective, and he was pissed.

“It’s good you didn’t come to my house,” the cop told Horne, “because I’ve got a gun.”

Agents and brokers were slated to spend nearly $10.5 billion in advertising in 2017, according to an estimate by analytics firm Borrell Associates. And with more homebuyers beginning their purchases online, lead generation is becoming a more popular way of winning business. StreetEasy’s Premier Agent program thrust the topic into the New York zeitgeist last year, and other big national players since as Rupert Murdoch’s Realtor.com have sensed an opportunity.

But there’s a whole nether universe of startups that specialize in lead generation, and brokers say many struggle to provide good leads. Some, they say, even dabble in illegal activity.

“I’m reluctant with the services for a couple reasons,” said Mirador Real Estate’s Neeta Mulgaokar. “One, I don’t know their track record. I don’t want to invest in something [when] I don’t know what my return is going to be… And two, I’m not really sure where I stand on my ethical viewpoint on buying leads from someone else’s product.”

Hotline bling

Online lead generation is still viewed by many as a dubious practice.

It’s “kind of like the used car industry back in the 1970s,” said Michael Urbanksi, founder of a Annapolis, Maryland-based lead platform called Qazzoo. “Not really well respected.”

Urbanski, who has worked in the lead-gen business since the 1990s, caught wind of a new competitor a couple of years ago with a puzzling business model. A startup called Buyerhomesite was calling several of Urbanski’s long-term clients, looking to poach them away, so Urbanksi looked into it and began talking to the company’s former employees. He discovered the leads being offered weren’t leads at all, and tipped off law enforcement.

An investigation by the U.S. Attorney’s office in Maryland found that for more than a year, Buyerhomesite’s CEO, Joseph Dominici, created numerous fake leads, buying burner phones with area codes from all over the country with fake lead names and fake contact information. These leads, all controlled by his employees, were then sold to brokers through Buyerhomesite and another site called FreeHomeFind.

In September, Dominici pleaded guilty to wire fraud and identity theft charges. Sentencing is scheduled for Jan. 30, and court filings indicate he will serve at least two years for his crimes. Dominici’s attorney, Robert Bonsib, did not respond to a request for comment.

And then there are entrepreneurial types who peddle leads that may be real, but are acquired through questionable means.

There are networks of sites that are designed to look like websites for top new developments such as One57, 220 Central Park South, and many others. These copycat websites solicit contact information from potential buyers who may believe they’re on the official website of the project. That contact information, now a solid lead, is then sold to brokers.

Google has a “very slow, very spotty mechanism” to address the issue of these copycat sites, said Jared Seeger, the president of Knightsbridge Park, a digital real estate marketing agency. Seeger, who The Real Deal interviewed in 2016 about this issue, said the problem was much starker in less regulated real estate markets such as Miami.

“The New York market is generally less tolerant of that kind of behavior,” Seeger said.

A broker at Douglas Elliman insists a lead service actually tried to steal one of her own leads, a $10 million buyer. The broker, who spoke under the condition of anonymity, said she and her colleagues were asked by management several years ago to give their client contact information to a new third-party service, ostensibly so the service could help streamline the home search for their clients. Instead, this broker said, her client filled out a survey early one morning and immediately got a call from someone who seemed more interested in taking over as the buyer’s agent.

“They [the service] tried to steal the customer for themselves,” the broker, who’s been wary of lead-generation services ever since, said.

Watered down

Fraudsters like Buyerhomesite are the exception rather than the rule, Urbanksi said, and firms that can’t get their acts together don’t last. But even mainstream platforms often fail to deliver useful leads.

A big problem is lead dilution. With services like Zillow, Trulia, and Realtor, “every lead you get is being diluted four times,” Urbanski said.

Aaron Graf, CEO of LG Fairmont, a boutique brokerage that’s built its business around lead generation, said dilution is chief among broker gripes.

“They won’t say this, but they’ll sell a lead three times, five times and you don’t even know how many times they sell that lead,” he said of major lead platforms, speaking generally. LG Fairmont employs someone in-house to turn a mass of leads purchased from different sources into actionable intelligence for its agents. The company analyzes and tracks leads in order to determine how they can be best put to work and creates agent-specific algorithms to determine what’s a good match.

StreetEasy declined to comment on the mechanics of its lead-generation product. But a source familiar with the company’s process said the accusation was unfair. While StreetEasy doesn’t explicitly sell the same customer to different brokers, if the customer fills out an interest form multiple times for multiple properties, then those have been generated as separate leads, the source said. The company rolled out a feature called Premier Agent Concierge, which prioritizes the customer’s first attempt to get information about a listing by assisting the customer in reaching an agent. However, the feature does not assist new connections for the customer if he or she later solicits info about other listings—that’s up to individual agents to sort out for themselves.

When StreetEasy first rolled out Premier Agent in March, brokers were irate that the feature would display advertising brokers’ contact information on the listing by default, confusing some consumers who may have been looking to reach the exclusive listing agent. Star broker Ryan Serhant called the practice “shocking” and “illegal,” while others likened it to stealing. StreetEasy has since made it easier to distinguish between the listing agent and the agent advertising to be there. Many, including Serhant, have since got on board.

“A successful lead generation platform needs to be an end-to-end partner that helps agents manage and scale their business,” StreetEasy general manager Susan Daimler said in a statement. “For the past 10 years, Zillow Group has been building Premier Agent to be just that and we brought it to New York City after hearing some of the challenges that local agents were facing, for example – the ease of responding to leads in a timely manner, managing lead volume and organizing and scaling their businesses.”

The chief complaint among agents, however, isn’t sketchy situations with lead services, but just that the leads are weak. Horne, the Corcoran agent who caught the cranky detective on a bad day, also recently called a lead he bought who turned out to be deceased. And another who didn’t speak English. But he’s used other lead services, and on the whole says they’ve been great.

“I’ve spent a ton of money on SmartZip,” he said. “They’re analyzing different variables for homeowners who are looking to sell… those are good leads.” Bess Freedman, co-president of Brown Harris Stevens and a vocal critic of Premier Agent, said she was impressed with a new service called RealScout and was looking forward to “doing something with them in 2018.”

Brokers’ frustrations with leads sometimes stem from misconceptions about what leads really are, sources said.

“You get 50 leads – 10 are gonna be spam, 10 are gonna be trash, it’s just the law of large numbers,” said Graf. Agents should understand that you can’t always draw a straight line to the closing table and that every lead has an expiration date, he added.

“Internet leads disappear in value really rapidly,” Graf said. “After five minutes, basically, you lost it.”

Clarification: This article was updated to clarify aspects of StreetEasy’s Premier Concierge feature.