Zillow is a massive real estate marketplace. Most people have visited the website, whether it’s to search for a new home or to casually spy on the price of a friend’s new home.
However, when you use Zillow as a consumer, it’s important to understand that Zillow is not just connecting consumers to agents for free. Zillow gets paid a significant piece of the commission every time someone uses their agents. There is a lack of transparency on how Zillow is paid, and I aim to clarify this.
How the NAR Ruling Changed Home Buying
The core goal of the recent lawsuit against NAR (National Association of Realtors) was to force more transparency around how buyer’s agents are compensated and who’s paying.
Historically, buyers often had no idea what their agent was getting paid because the seller paid the buyer’s agent’s commission. That lack of visibility was seen as limiting competition and keeping commissions inflated.
Now, as a result of the settlement, buyers are required to sign a buyer broker agreement. The agreement lays out the expectations, including compensation, so that the buyer fully understands how their agent is getting paid and what, if anything, they’re financially responsible for. It’s about putting everything on the table upfront, so no one is assuming the seller automatically covers it.
Is Zillow Transparent?
However, the largest real estate website, Zillow, which also operates as a licensed broker, isn’t held to the same transparency standards when it comes to disclosing how it’s paid. Zillow’s business model is fundamentally centered on capturing and monetizing consumer information.
Here’s how it works:
When a consumer searches Zillow, and finds a listing they like, they have the option to click “contact agent.” Generally, consumers assume they’re reaching out to the actual listing agent. However, in reality, Zillow redirects them to a Zillow “Premier Agent,” who is not the listing agent. And that’s where the transparency issue begins.
Does Zillow Charge a Fee?
How much is Zillow getting paid to connect that consumer to a Premier Agent? To understand that, you need to look inside the Zillow Flex program. Zillow Flex is a performance-based lead system where agents only pay if a deal closes — but when it does, Zillow takes a 40% cut of the broker’s commission.
While it might look like a free connection on the surface, Zillow is making significant money on every closed transaction that comes through its platform. All the while without any disclosure or signed agreement on how they get paid.
Is Zillow Banning Listings?
And here’s the bigger picture: Zillow is planning to ban listings that have been pre-marketed to the public, whether that’s a yard sign, social media promotion, or listing it on a private brokerage website. While Zillow claims that they’re attempting to allow equal access to all buyers, it limits home sellers’ possibilities for how they’d like to list their home.
While Zillow promotes itself as a platform of transparency, its attempt to control how homes are marketed and listed brings this into question. Moreover, Zillow’s lead generation practices lack transparency and can compromise both the consumer and the agent.
Bottom Line
Consumers simply need to be knowledgeable when searching online marketplaces like Zillow. It can be beneficial for casual viewing of homes; however, if you’re serious about buying or selling, it’s essential to rely on an expert local real estate agent.