Realtors Will Miss Zillow and Realtor.com When They’re Gone

I get the feeling not many agents totally grasp what is going on with portal leads in America.

Some may not care. But if you buy or are considering buying leads from the major portals, you will want to be paying attention.

Agents have become accustomed to being able to purchase Zillow and Realtor.com leads easily. Both companies make their money from agents buying leads, and are always happy for a new paying customer!

Well, not for long.

Realtor.com and Opcity

Literally as I write this, there is a rumor that Realtor.com has let go some of its sales staff. It reminds me of Remine laying off 30% of its sales staff after being one of the most successful and fastest growing companies in 2018.

Normally layoffs are a bad sign for a company, right? Well, that certainly wasn’t the case with Remine. And I highly doubt that is the case with Realtor.com.

Instead, these were responses to major business model changes.

In Remine’s case, it was because Remine had decided to stop selling to onesies and twosies brokerages and MLSs and instead simply become the MLS. That’s a very different sales strategy that apparently needed either different kinds or just fewer sales people.

In Realtor.com’s case, it is because they are changing the way they sell leads. They made this abundantly clear last year with their acquisition of Opcity, a lead referral platform that also came out of nowhere into a juicy acquisition.

Realtor.com wants to sell you leads in exchange for referral fees at closing. They aren’t doing that yet, but they’re trying. For them, it seems like a win-win. Brokers don’t have to pay for “bad leads”. Only leads that close! Meanwhile, Realtor.com can probably take a chunkier piece of the pie. After all, common referral fees for similar programs like USAA Movers Advantage can range between 25-45% of a transaction’s commission.

That’s $1000s per closing to Realtor.com versus selling individual leads for $20-$100. They lose out on the leads that don’t close, but I imagine if you do the math, Realtor.com comes out ahead or they wouldn’t be trying it.

Zillow, Too

Note: I am an employee with Zillow in their Zillow Offers division. Everything I am sharing here is public information.

The writing has been on the wall (and it’s not a secret) with Zillow Premier Agent for a long time. It’s called Flex Pricing.

It’s not just about possibly making more money or aligning incentives with customers. Zillow (and Realtor.com) has their reputation to maintain! They want their portal visitors to get great customer service from the agents they connect them with.

But buyers and sellers don’t get good customer service when they send Zillow their information and then …. nothing happens. Or perhaps the agent shoots a single email and then …. nothing. In fact, Zillow estimated that a whopping 49% – HALF! – of Zillow inquiries got no response whatsoever from the agents paying for those leads.

True follow up and nurturing, especially for internet leads, requires more. And when the agent fails to provide more, A) the agent gets angry at Zillow for selling them “bad leads” when it was actually the agent’s own lousy followup, and B) piss off the buyer or seller who trusted Zillow to connect them with an agent.

That is why Zillow attempted its ill-fated concierge program. They wanted to take away the followup from agents who, generally, are awful at follow-up. They wanted to improve the customer experience (technically their customers are agents, but it’s their audience of buyers and sellers that they must please in order to sell that audience to agents in the form of advertising and leads).

Just because the concierge idea didn’t work out doesn’t mean Zillow is giving up on improving the experience for portal users. Instead, they are following Realtor.com and Opcity’s lead and getting into the referral game.

Buh Bye Small Timers

So what?

Well, now Zillow and Realtor.com are invested with agents. They only make money when you make money. That is the reverse of the original model where you buy the lead and pay up front, whether or not that lead ever closes.

That sounds great, right? Every Realtor wants leads that you only pay for when you get paid! Zillow and Realtor.com want to give you good leads that will close or else they don’t get paid!

Not so fast. If Zillow and Realtor.com only get paid if you are successful, they are really invested in your success. That means they only want successful agents working their leads. They are no longer interested in handing out leads to part-time agents or agents with lackluster followup skills.

The 49% of Realtors who are not responding to their Zillow and Realtor.com leads may just get a call that is not trying to sell more leads, but instead politely closing the account in order to hand those leads to an agent who will work them.

Being a “Premier Agent” could start to mean a lot more than simply forking out $100s, $1000s, or $10,000s monthly for leads. It could actually become an exclusive class of real estate agents who qualify for Zillow leads.

If you’re skeptical, that is exactly the business model of every other referral system like the aforementioned OpCity and USAA Movers Advantage. Good luck calling either one as a small time agent and getting leads from either. It isn’t going to happen.

Become a Big Timer

Don’t despair!

First, if you don’t use Zillow or Realtor.com anyway, then nothing is changing!

Secondly, if you are a lead subscriber, and you don’t consider yourself a “big timer”, there is time to become one!

I don’t know anything about how Zillow or Realtor.com may ultimately evaluate with whom they want to work. But I do imagine they will have visibility of how many leads you are closing, your follow up, etc.

I recommend knocking these leads out of the park if you are buying them. First, you should be doing that anyway. Secondly, show Zillow and Realtor.com you have mad lead conversion skills. That will maximize your odds of holding onto or even earning more leads from these companies.

But Will it Stick?

Zillow and Realtor.com are very eager for these new models to take shape.

But the jury is still out whether brokers and agents are going to take to the changes. Zillow learned the hard way with their Concierge program that brokers still have a say, too, and Realtor.com’s experiment is still too young to know whether or not it’s going to stick.

If it doesn’t, it will ironically be because the very business model works against itself. Zillow and Realtor.com are trying to work with the best agents. The best agents have great followup systems and are able to predictably nurture and convert Zillow and Realtor.com leads already. Why do they need to postpone paying until closing in a model where often the referral taker can take a bigger cut?

Naturally, anything Zillow does is going to have its haters.

And I suppose the haters have some valid points. Zillow has a lot of weight to throw around because he who owns the leads owns the leverage. The leads are Zillow’s and Realtor.com’s to do with what they like. If you are a top producing agent buying portal leads, the final decision may be to accept the new terms or they will find another broker who is salivating for the chance at hundreds or thousands of leads they don’t even pay for until they convert.

Even while Zillow was suffering through the Premier Agent misfire, their revenues continued to grow. Someone will be more than happy to pay for a decent lead.

Conclusion

My bet is that the new model does stick. Possibly not without some angst. Savvy industry observers will understand it for what it is, a natural evolution as the real estate tech giants struggle with one another to become the ecosystem for real estate.

I don’t recommend paying for leads anyway unless you are prepared to knock it out of the park. The margins are too small to allow a single lead to go to waste. Wherever your leads are coming from, it will pay to invest in your nurturing and followup. Do that today!