Zillow’s Hidden 40% Agent Fee Is Costing You Big

This is the stuff I can’t talk about on YouTube but is important to continue the conversation offline. I would love to get your input as we explore the issue of Zillow’s 40% Secret Agent Referral Fee (Flex Program) that the consumer is, from my knowledge, not aware of.

The Big Question for You:

Do you think the consumer would still click the blue “tour” button on their website if they knew that 40% of the agent’s commission went to Zillow?

I personally don’t think so, and that’s why I made the YT video. It’s an interesting topic to say the least, even if you disagree and have one off stories about how Z has changed your business and life.

Whether you have been following Zillow over the past decade or not, they are indeed the most probable existential threat to the real estate agent industry.

They’re only one click away from removing you from the transaction as a buyer agent (imagine a “buy now” button on every listing - I can).

The only reason they’re only NOT doing this now because they’re working agents for up to 40% of your commission through their flex referral program and because they’re selling you leads for up to $1,000+ per phone call.

At some point, Big Z is going to pull the trigger. When? I don’t know, but they’re going to do the math and figure it out. It’s estimated that the flex program is responsible for $425M in commissions referred in 2024 — already.

Big Z is, surely, at a minimum, a competing broker for your leads, whether you are aware of it or not.

My view point is that they’re funneling cash flow out from local agent’s pockets and into Wall Street. Wall Street brokerages are setup the same way with MLMs and financial cash flow engineering, but we won’t get into that now. They’re businesses, and good ones that add value in various ways, I get it. I just prefer my money flowing to local businesses.

In fact, I’m a hypocrite. I used to buy Zillow leads too, even up to $70,000/month on their Premier program when the pandemic hit and the leads were 50% off (am I crazy? yes - my wife certainly thinks so.) The numbers made sense at the time, despite the uncertainty. Prior to 2020, I had made more than $1,000,000 in GCI in one year, partly due to buying leads from Z and R.com.

Buying leads worked really well at first, and then each month and year the margin got narrower and narrower until there was no profit left and I decided to shut it off. Wall Street had maximized the lead cost to maximize their revenue. But - it was good for me because it attracted agents to the brokerage and grew my lead database. Kudos to the model, it worked and was a fast track to growth.

But I always felt bad because I knew I was feeding the beast.

One day, I think Zillow will become a proxy MLS (it pretty much already is, did you see what they’re doing with Compass’ exclusive listings?).

Consumers love their search product and consumer experience.

The main issue Z solved is that most agents don’t answer their phone. They’re either busy, lazy, or part time, always on vacation, or watching Netflix when they should be working (or a combo of all of that).

Thus, Zillow created a better mousetrap by solving that responsiveness issue, but it’s now costing you 40% and probably even more in the future (and maybe your entire profession).

What bothers me is a few things. First, that the consumer doesn’t understand that when they click on the Z site to request a tour, they’re not getting in touch with the listing agent nor rarely even in touch with the listing brokerage. The listing agent’s info is listed, but farther down in the page, and it’s certainly not highlighted.

Often the customer is routed to a random flex team buyer agent, who is often paid like a cheapo showing agent (most, when they do the math, are making less than an Uber driver after splits and fees). The Premier agents who they’re routed to are hanging by the phone and paying up to $1,000+ to take the live call, praying it’s the 1 of 10 calls that converts so they can get their money back (maybe they make more because they split the cost with their preferred lender). It’s a grind. Few agents actually make good money, most don’t. This is true with lots of marketing options for real estate agents, not just Z.

My second issue is that the consumer doesn’t know that by clicking on Zillow and searching their portal, that the agent they’re connected to via flex is giving up 40% of the commission off the top.

The worst part about it all is I see agents post Zillow links on their personal and business social media pages, which basically routes their personal database and customers to an existential threat competitor who sells them back their own leads (or worse, sells their leads to someone else!). It’s sad to watch and I often bite my tongue, but someone has to say something. Maybe that person is me, maybe it’s you.

Someone has to have the courage.

Zillow has a track record of grabbing more and more of the commission pie and they’ve consolidated companies for years including:

• Trulia - 2015 - A major online real estate marketplace.

• Dotloop - 2015 - A transaction management software for real estate professionals.

• Mortgage Lenders of America - 2018 - A national mortgage lender, enhancing Zillow's home financing capabilities.

• ShowingTime - 2021 - A home-touring technology company.

• VRX Media - 2022 - A real estate photography and media company.

• Spruce - 2023 - A tech-enabled title and escrow platform.

• Follow Up Boss - 2023 - A customer relationship management (CRM) system for real estate professionals.

Z is moving closer and closer to the consumer, and building a bundle of services to offer them — so they can ultimately replace the people who funded them: agents.

They will do this when it makes financial sense to do so.

Are you building the bundle of services for your customer? Are you able to compete with Zillow if they turn the tables on us tomorrow?

This video breaks it down.

As a side comment, thank you for subscribing, and commenting on YouTube videos when they come out — liking them, etc. — as I am trying to get the channel off the ground. We have 28,000 subscribers to this Think Big, Question Everything newsletter and I consistently have 16,000+ folks opening and reading my emails.

It’s been 5 years of writing about real estate, and I’m so grateful for you reading and now, watching. Cheers!

-JB (jon@movewithmomentum.com)