Zillow Flex Fee Rises to 40 Percent

Zillow recently raised the success fees on its Flex program – from 35% to 40% – for the completion of a successful transaction in six markets.

Why it matters: Zillow, like every other leading real estate portal around the world, has tremendous pricing power, and is able to flex that power to squeeze more revenue from agents and the multi-billion dollar commission pool.
Dig deeper : In early 2022, Zillow set itself lofty revenue goals, including generating an additional $1.5 billion per year from its Premier Agent program.

• This revenue stream, paid for by agents, taps directly into the $70+ billion annual commission pool.

A key component of Zillow’s strategy is growing its Flex program – Next Gen Lead Gen that monetizes transactions on a success fee model.

• That success fee has been 35 percent for years, but has recently risen to 40 percent in a half-dozen markets.
  

• Zillow Flex accounts for around 25 percent of Zillow’s entire Premier Agent revenue, a percentage that has yet to materially change in 18 months.

The pricing change quietly occurred in September (there was no press release, for obvious reasons) in six markets: Denver, New Haven, Cape Coral, Reno, Oklahoma City, and Greenville.

There is a graduated referral fee band, but in all but two markets the average home value (as computed by Zillow) falls within the highest, 40 percent fee band.

The bottom line : Zillow’s market dominance, coupled with the exclusive nature of its Premier Agent and Flex programs, gives it unprecedented pricing power.

• As outlined in my Real Estate Portal Strategy Handbook , most revenue growth at real estate portals around the world comes from raising prices.
  

• Despite talk of new revenue streams and super apps, the easiest way for Zillow to increase revenue may be to simply raise prices on a captive audience.