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5 reasons to stop paying for Zillow leads.

Newer Real Estate Agents may be unaware of the history and future intentions of the Zillow Group, so this post is by way of a short introduction and history of this major player in our industry – and why you might want to reconsider using their services.

Zillow’s website was launched in February 2006, stating that it is “A media company that generates revenue by selling advertising on its web site. The websites biggest draw from the get go was the Zestimate. A controversial, frequently inaccurate estimate of a homes value that has taken a really long time to try to perfect.

In 2011 Zillow became a public company. In 2020 the Group reported revenues of $3.339 billion, up 22% from 2019’s tally.

That’s a lot of zero’s – $3,339,000,000

Note that the Groups top executives are incredibly well rewarded (source) year after year:

Includes fair value of stock and option awards and long term incentives awarded during the year. (Source)

To put it into perspective Rich Barton’s total remuneration was $23,140 for each and every day in 2020.

Sitting on the Board is pretty lucrative too, who wouldn’t mind an extra quarter of a million $$$’s for a day or two a month?

Total almost $2m. Note that the ex-CEO Spencer Rascoff is still involved in the Group. (Source)

In 2020 the Zillow Group’s income from Premier Agents was reported at $1,046,954,000 (that’s over a billion dollars) + $403,278,000 that was attributed to revenue generated by rentals, new construction and display, as well as revenue from the sale of various other marketing and business products and services to real estate professionals (view balance sheet). No wonder it can afford to pay all those execs and board members.

The Group has not disclosed how many Premier Agents subscribe to the service, but let’s take a stab at it: If every agents pays $500* per month = $6,000 per year divided by $1billion = 166,666 agents 🙁 (*many, many agents pay waaay more, and many pay less).

In it’s 15 years of existence the Group has made huge amounts of money from it’s advertising customers (you) and swallowed multiple companies along the way. Some of these companies, such as Dotloop, Bridge Interactive and now ShowingTime were considered reliable data partners by the industry prior to acquisition.

Stop paying for Zillow leads. Reason #1

These acquisitions have caused considerable consternation in the Realtor community, who may be rightly concerned about data being shared amongst it’s subsidiaries. Zillow has stated this won’t happen, but the company has a long history of misstating their true intentions.

The so call 4th Industrial Revolution is centered on data and artificial intelligence – two areas that Zillow is excelling at. For instance; the Zestimate is an Ai algorithm that uses predictive analytics to produce an estimated value.

It’s this sort of data analysis that Netflix used to decimate Blockbuster and how Expedia eliminated tens of thousands of travel agents jobs and then proceeded to gobble up competing platforms Travelocity and Orbitz.

Which brings us to Zillow always swearing that it would never become a Broker, yet here we are – as of January 2021, the company is now operating a real estate brokerage – Zillow Homes and have switched to MLS feeds to fuel the listings on it’s site.

Now that the Group has direct MLS feeds, it’s no longer possible to prevent them from advertising your listing on their platform, unless your Broker completely opts out of IDX – in which case you will not be able to offer homes from other Brokers on your personal website.

Internet Data Display (IDX) otherwise known as Data Reciprocity, is a policy that allows brokers to exchange consent to display one another’s property listings on the Internet. 

The NAR

In 2018 Zillow Offers also started actually buying homes and flipping them. But it’s not the only player in this space (source).  Redfin, Offerpad, Opendoor and others, are all aiming for the opportunity to become a one-stop shop for sellers.

Stop paying for Zillow leads

In 2021 and in many markets, the Zestimate displayed on the companies website, is considered an opening offer to purchase the property.

Stop paying for Zillow leads. Reason #2

They are openly and directly competing with you and many believe at an unfair advantage. Many of the homes being bought by Zillow Offers are being sold to institutional investment groups (reported by Bloomberg) to be turned into rentals, bypassing the traditional methods of using local real estate agents to facilitate the transaction.

Agents in many markets across the county are reporting that Z and other players (Offerpad, OpenDoor etc.) are paying over market value (source)- we suspect this a straight up market share gambit to establish their brands in the public’s mind.

In Atlanta, Phoenix and Tucson owners are already working directly with licensed employees of Zillow Homes. Those homes that actually hit the MLS will be listed and handled by Zillow Homes licensed agents. Zillow Offers will soon be coming to a market near you:

The company says it plans to expand into additional markets later in 2021. 

This is the Zillow “Sell” page:

Right at the top is “Get Your Offer” – an invitation to sell directly to Zillow Offers.

Note that consumers can add a FSBO listing for free 🙁

Stop paying for Zillow leads. Reason #3

Zillow actively encourages FSB’s to list their homes for free. The site lists these advantages:

  • Post a listing for free, including video and unlimited photos.
  • Your home will be listed on Zillow and Trulia, reaching the largest audience of home shoppers on the Web.
  • Home shoppers receive instant emails about new listings.

Yes there is a link to Find a Sellers Agent, but this is topped and tailed by other competing offers.

One reason Z is offering free FSBO advertising is to convert them to Offers. They already have the contact and property info for a direct marketing campaign, oo when a seller is ready to give up trying FSBO, there is always a Zillow Offer to fall back on.

Stop paying for Zillow leads. Reason #4

Click on “Find a Sellers Agent” (or Find a Buyers Agent) and you will find yourself on the Premier Agent’s page, which is full of agents and brokers who pay to advertise there.

According to the Group: Zillow Premier Agent is an advertising program that helps connect customers to local real estate professionals. Zillow Premier Agent partners are paid advertisers and are not affiliated with Zillow, Inc. brokerage or any of its affiliates.

Zillow’s leads have been described as the crack cocaïne of real estate!
Very easy to get started, but almost impossible to give up once you get addicted!

Many addicts 😉 agents are paying hundreds if not thousands of dollars every month and there must be a lot of them to add up to $1billion last year. For sure some of the lead recipients would not continue if the leads were bad, but there are many, many other ways to attract potential clients without paying through the nose.

There is a strong suggestion that Premier Agents might be wasting their money, as leads are reported as being pushed to Brokers who have agents with a high customer-service rating (source).

Zillow Flex. Now that Zillow is a Broker they can collect referral fees.

Zillow Group collects referral fees from Premier Agents and Brokers, stating that it is an “industry standard.” Similar referral fee networks typically receive 25%-40% of the agent’s total commission.

According to Zillow Group “Flex is the exclusive Premier Agent program for partners in Atlanta and Phoenix. It is also currently active in several markets across the country.” Apparently Flex is only available by invite – I hear agents are getting cold calls from Zillow pitching the program. Again, watch this space to see this program being rolled out to many other markets in the near future.

Paying for leads is a passive activity – you signup, you pay’s your money and you (maybe) get’s your leads.

Other lead generation methods, like the ones below, take time, energy and money to produce a result which I guess is the attraction of bought leads. However, done diligently and consistently these methods will produce predictable results at much less expense and entirely under your control.

Alternate lead generation ideas:

  • Direct mail farming campaigns.
  • Database mining.
  • SOI (sphere of influence) contact campaigns.
  • Facebook marketing.
  • Leverage social media.
  • In person network events.
  • Start and maintain a blog.
  • Target expired listings or FSBO’s.
  • Start a YouTube channel.
  • Host open houses.

The realization that you cannot trust Zillow is Reason #5.

The Group has said it would never, ever become a Broker. Even as late as 2018 we heard live on stage from Rich Barton, that it would never happen. BUT IT NOW HAS!

Rich Barton, one of the original founders, has retaken leadership control as CEO as of February 2019. Rich is as smart as hell (he previously founded the travel site Expedia) and in the process has become a billionaire – ($1.5b source).

During his current leadership he has created Zillow Homes – a fully fledged licensed Brokerage in most US States (check here for list) built to service the growing home purchase subsidiary.

“The world is going to one click — why not real estate? That’s where we’re headed.”

Zillow CEO Rich Barton Company earnings call Feb 2021.

Let that sink in for a minute. OK, ready? Where do you think a real estate agent fit’s into that vision? Hmmm ….

Rich Barton

The Group has acquired data heavy businesses despite protests from Realtor groups. There is every indication that they will continue to acquire companies that it deems will benefit its business ambitions, because this is all about controlling the data and using Artificial Intelligence for analytics, predictions and business processes.

Zillow Offers is in it’s infancy right now, but there are parallels to the Amazon model, where profits are forsaken to gain market share. We are talking BIG losses (source). Some have estimated that Z lost $72,000 for every home it flipped in 2020 🙁 (source).

Some have even asked if Zillow could become the Amazon of real estate (source). The Group is in this for the long haul, so don’t be surprised if the big losses continue for several years until they have gained sufficient credibility and market share to permanently change buying and selling habits and expectations.

The crystal ball:

It also doesn’t make that much imagination to see how a buyer and seller could each complete a questionnaire as to their needs and wants in a deal, and then for Artificial Intelligence and Machine Learning to determine a fair price and terms, going so far as to complete all the necessary contract and paperwork for the transaction to reach a close – almost one click, right? Will real estate agents be an element in this vision?

Add your comments below – let us know if any of this makes sense or touches a nerve.


So, with all that we have discovered together in this post, go ahead and review this video uploaded to YouTube on September 22nd, 2020, featuring Errol Samuelson, Chief Industry Development Officer (whose annual salary btw, was reported at a whopping $1,217,590!)

I suggest you take Errolls’s practiced glibness with a very big pinch of salt .

Samuelson was previously President of Realtor.com but jumped ship in 2015. Zillow ended up paying $130 million (plus $18 to $20 million in legal bills) to settle a lawsuit brought by Move Inc (owner of Realtor.com) and the National Association of Realtors, alleging he and one other executive stole trade secrets. (source)

Don’t think that these are the last new initiatives that will be introduced – in March 2021 the Group announced a hiring goal to increase Zillow’s total workforce by approx 2000 (an increase of 40%) by the end of 2021 (source). They clearly have many other plans to part you from your money, or maybe eventually to replace you altogether 🙁

Many saw this coming and took the decision not to help fund the Groups growth (example), but many other real estate agents and brokers have enabled the company from it’s very inception, by paying to advertise/buying leads (to the tune of over $1,000,000,000 in 2020) and fueling it’s expansion.

“This is a fight and there is no way around it.”

Gary Keller, Founder of Keller Williams

Gary Keller has preached on this subject for a very long time. Here is a video featuring one of his talks at the 2016 Family Reunion – it’s worth the watch:

Gary Keller is a super smart person. He’s been in the industry for decades, has an extraordinarily faithful following and has a clear vision for the future of real estate. He is is also author of the best selling book The Millionaire Real Estate Agent that offers the blueprint plans to prospect for leads, without having to pay for them.

Sean Gotcher a Realtor from Las Vegas has an interesting take on this situation. He doesn’t mention which company he is referring too, but as I have embedded in a post about Z, I guess it could be? And his post has totally gone viral with over 350,000 likes!

@seangotcher

#housing

♬ San Tropez – Illect Recordings

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Fact content checked and verified on third part sites with attribution.


It’s been at best shortsighted and expensive for many, but now it’s time to stop feeding the beast.

Consider yourself warned!

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