Two bird dogs quoted me: $400 a lead vs 1% at close

I'm funding the acquisition side for a partner who buys and flips 6 to 8 houses a year in a mid-size midwest market. Average purchase is around $145k. Two people pitched me last week and the pricing is nowhere near each other.

Person A: $400 per qualified lead, capped at 20 a month, exclusive to us for 14 days. "Qualified" in their agreement means owner contact was made and the owner said they would consider selling. Nothing at close.

Person B: zero upfront, 1% of purchase price at close, so roughly $1,450 on our average buy.

My partner's own mail campaign last year ran about one closing per 34 real seller conversations. If A's leads convert at that same rate, 20 a month at $400 is $8,000 for about 0.6 closings, so north of $13k per deal acquired. B costs $1,450 per closing and nothing in a dead month. On paper B wins by a mile.

What bothers me is that B has no reason to filter anything, and my partner's time is the actual scarce resource. Twelve garbage leads a week costs more than $1,450. A's model at least prices the filtering, if the filter is real. I don't know yet whether "said they would consider selling" is a screen or a script.

The decision on my desk is whether to fund A for a 90 day test, run both in parallel and compare cost per accepted lead, or go back to A and say the per-lead number only works at $150.

4 replies

2ryanmck27SC2C

Before you price either one, get clear on what your state allows. Whether an unlicensed person can be paid a percentage of the purchase price for producing a buyer or a seller is a licensing question that varies state by state, and some states treat compensation tied to a closed transaction very differently from a flat fee for information. That is a question for a real estate attorney in your state, not a forum.

Mechanically it matters to your comparison because B's 1% structure is the one most likely to run into it. A's flat per-lead fee is easier to write and easier to defend, which is part of what you'd be paying the premium for.

3mitchell_ray4 Get yoursPRO6

A cap of 20 a month reads like a production target to me, and production targets are usually where lead quality goes to die.

3aliyah_bAU2APRO6

Your whole comparison rests on the 1-in-34 number, and that number came from mail responses, which are self selected people who called you. A human-screened driving list converts differently, sometimes better because someone has eyes on the condition, sometimes worse because the bird dog is knocking on doors nobody chose to answer. You don't know which yet, so don't buy 90 days of anything.

What I'd put in front of both of them is a hybrid. Small acceptance fee, say $100, paid on every lead your partner accepts after a 48 hour review window, plus $1,000 on any of those that closes. Rejected leads cost you nothing and go back to them free and clear. That does two things at once: it pays for the filtering work in real time, so a decent bird dog can eat, and it keeps the big money attached to the outcome.

Run it to 30 accepted leads before you decide anything. At $100 that's a $3,000 experiment and you come out of it with a real conversion rate instead of borrowing your mail number.

One more thing on B. Zero upfront sounds free, and it means B will work your leads last, behind whoever pays them something. Bird dogs with three clients send the good one to whoever pays fastest. If your partner's edge is speed on off-market houses, being third in line is expensive in a way that never shows up in the fee comparison.

Two bird dogs quoted me: $400 a lead vs 1% at close

4 replies