Is Zillow Recession-Proof?

Is Zillow Recession-Proof?

Across the country, the Covid-19 outbreak caused disruptions to the residential real estate market – at least in the near term. When the pandemic first hit, realtors concentrated on cutting nonessential costs. In order to achieve transactions in the interim, the ROI on lead generation came under scrutiny. Online real estate platforms would normally expect adverse effects in such circumstances, yet with its new Flex platform and restructured incentive program, Zillow may be able to better weather the storm than its competitors.

Flexing its muscles

Before Zillow switched over to Flex for their prime markets, Premier Agents were required to pay an upfront lump sum in order to receive connections and leads in a specific geographic area based on ZIP code. Under the new Flex program, real estate agents receive connections with payment working on a post-sale basis in the form of a success fee when transactions are closed.

There’s been a mixed reaction by realtors over the new approach. Real estate agents naturally feel positive about the transfer of revenue lag from themselves to Zillow. Not having to pay until a transaction is settled puts agents in a much better position in terms of cash flow. 

Similar to technology platforms in other industries, the use of data is king. Zillow is proactive in terms of making sure the data they garnered through their high volume of inquiries and appointments is used to the best advantage. Leads are immediately passed on through a call center handled by a live person, and Zillow actually works with the agents on the scripting and answering of calls, as well as the monitoring of appointment rates. This sharing of best practices assists the real estate agent in gaining a better understanding of consumer behavior, which of course helps convert leads to sales.

Not all realtors are enamored with the process. Agents reported teething troubles during the initial transition period in that leads located outside an agent’s expertise area were being forwarded. The lack of local area knowledge meant it was harder for them to sell, in turn hurting the agency’s conversion percentage by which Zillow rates them. The volume of leads also varied, from either too many to handle one day, to none the next. The sharing of best practices was resented by some, deemed as micro-managing. The main complaint, however, is that there is little to no understanding of how the algorithm provides leads to a realtor. Whilst answer rate and consumer scores clearly factor into the process, there have been some reports of inconsistency in terms of the number of leads, especially in the early days.

A numbers game

Evidently, Zillow is not the only platform out there serving the residential real estate market. Online lead generation can also be sourced via the use of Google AdWords, Facebook, Instagram, and  Google AdWords can attract a high number of inexpensive leads, though these are often much harder to convert into actual sales. Google Local Services, currently in beta for certain markets only, is seen as a good alternative because local shops don’t have to go up against national companies. caught the notice of some due to a fee reduction offer at the beginning of the pandemic, though ultimately their promise of high numbers of leads fell far short of the mark, which resulted in some agencies canceling the service altogether. Zillow, on the other hand, is viewed as being in the best position to survive a potential upcoming recession, simply because it generates the most buyer leads. This has a lot to do with the high level of consumer trust for Zillow, as well as Zillow putting to good use its database to better understand and, ultimately, help the consumer. 

Worth paying for

Overall, realtors would naturally prefer to obtain leads from their own proprietary websites rather than having to pay for whatever form of lead generation. A lead from Zillow, however, is seen as worth paying for, simply because experience has shown that they are typically converted at a higher rate. Customers like and trust the Zillow platform which is evidenced by the number of clients it attracts. Nevertheless, a further tinkering of the Zillow algorithm may be due. This is to ensure leads are being directed correctly because if realtors lack control over their lead volume, it could mean they’re in for a tough year ahead – which serves neither the realtors nor Zillow.

This call was hosted on June 25, 2020, under the title: “(ZG): Flex Customer’s Insight into COVID’s Q2 Impact on Residential Real Estate Market, Spend on Lead Gen Platforms & Outlook.”

You can request a replay & transcript of the Hosted Event discussed above, or any of our Hosted Events, by emailing [email protected].

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