Determining the True Value of a Mortgage Lead

Value has been defined as “benefit minus the cost of attaining it.” This is called “the value equation.” To see how the value equation works, consider three mortgage brokers.

The first spends $2000 for 50 shared internet-generated mortgage leads ($40 per lead). The broker closes two loans—a respectable 4% close rate. With an average commission of $3000 per funding, the value equation for the shared mortgage leads is $6,000 (benefit) - $2000 (cost) = $4000 (value).

The second broker spends slightly more for exclusive internet-generated mortgage leads. That broker also spends $2000, but gets only 40 leads ($50 per lead). However, the exclusive leads yield four closed loans—a 10% close rate. With the same $3000 per funding, the value equation for the second broker is $12,000 (benefit) - $2,000 (cost) = $10,000 (value).

Both brokers spent $2000 for mortgage leads. The second broker’s exclusive leads had a value of $10,000—or $6000 more than the value of the first broker’s shared leads.

Surprisingly, more expensive leads are not necessarily better, even when they yield a higher conversion rate.

The third broker buys 20 leads from a telemarketing company for $2000 ($100 per lead). This broker closes 15% of the leads—achieving a 50% higher conversion rate than the second broker did. But wait. Assuming the same $3000 per funding, the value equation for the high-priced leads is $9,000 (benefit) - $2,000 (cost) = $7,000 (value).

The value of the second broker’s mortgage leads was $3000 greater than the value of third broker’s mortgage leads—and the cost was identical.

Cost alone does not establish the value of a lead, nor does the conversion rate. Only the value equation precisely describes the value of mortgage leads.

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