Zillow Flex is a lead generation option for Zillow Premier Agents that allows them to receive Zillow leads without paying any upfront cost and only paying Zillow after a transaction successfully closes. However, participating agents report Zillow Flex costing anywhere from 25% to 40% of the gross commission.
So is it worth it? Zillow Flex is not the first program to offer this referral-style lead generation option, but the major difference is that Zillow has unprecedented traffic and user adoption. In this article, we’re going to examine Zillow Flex, explore its pros and cons compared to Zillow Premier Agent, and see if 35% of your commission is worth the leads.
What Is Zillow Flex?
Zillow Flex is an invitation-only lead generation tool where there are no upfront costs, but agents pay a certain percentage of their commission if and when the lead closes on a property. The percentage of commission ranges from 20% to 35%, depending on the geographical real estate market and transaction price.
Zillow Flex vs Zillow Premier Agent
|Zillow Flex||Zillow Premier Agent|
|Where Is It Available||Everywhere||Everywhere except Raleigh, Atlanta, Denver, Phoenix—Flex is reportedly the only option in these markets|
|What Does It Cost Upfront||Nothing||$300-$1,000 / month* for a typical user|
|What Does It Ultimately Cost||20%-35% of commission||Nothing more than the monthly costs|
|Who Can Participate||Agents are invited; according to Zillow, they are “high-performing partners who provide exceptional customer service, and are willing to partner closely with us with the shared objective"||Anyone|
*Costs associated with Zillow Premier Agent are approximate. To learn more, read our review of Zillow Premier Agent.
Zillow Flex Pros & Cons
The Case for Using Zillow Flex
Zillow Flex might be exactly the lead generation you and your business have been waiting for. Here are three reasons why you should consider using Zillow Flex.
1. Leads With No Upfront Cost
Success as a real estate agent can be a bit of a chicken-or-egg scenario: it’s hard to get leads with no budget, but it’s hard to have a budget if you don’t first have leads to turn into closed sales. Zillow Flex solves this problem by allowing agents to pay after a lead has turned into a sale.
Sure, you’re going to make less on each closed sale, but some is better than none, and if you’re new to the biz, the experience is nearly as valuable as a commission check.
2. If You’ve Got a Big Profit Margin, This Is a Nearly No-risk Option
If you’ve got a strong system in place that yields high profit margins but just not enough leads to fill your time, Zillow Flex is a great option.
This is especially true for agents leading a team. Maybe you’ve got buyer agents without enough clients to keep them busy. These agents would rather work for a little less profit than sit in the office not working at all; Zillow Flex allows you to capture leads that you can use to fill out your team’s calendar without having to invest extra team resources to get them.
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3. A Viable, Scalable, Brokerage Lead Generation Model
If you’re a broker looking to provide extra value to the agents in your brokerage, being a part of the Zillow Flex program could be just the ticket.
By buying into Zillow Flex at the brokerage level, you could absorb half of the Zillow Flex referral cost, then ask the agent to cover the rest. Once an agent hits cap, you can pass along the entire lead cost. This model would allow you to scale more agents toward hitting their cap goals and supporting the overall health of the business as well as the success of the real estate agents in your firm.
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The Case Against Using Zillow Flex
It’s true: Zillow Flex isn’t the ideal option for everyone. Here are three reasons why this program might not be ideal for your business or even the industry at large.
1. These Leads Are EXPENSIVE
As paid lead generation goes, these rank as some of the priciest.
The cost-per-lead formula that you use on other platforms can’t be applied here because you’re actually not paying for leads—you’re paying for CLOSINGS.
Here’s an example of what we mean:
If you’re a standard Zillow Premier Agent, you’re paying for leads upfront. Let’s say, for the sake of argument, the following conditions are true:
- The typical sale price for a home in your market is $300,000
- The typical commission you get for selling a home is 3%
- Your typical closing rate for Zillow Premier Agent Leads is 5% (one out of every 20 leads converts within 90 days of reaching out)
- Your typical nurture rate for Zillow Premier Agent Leads is 10% (two out of every 20 leads converts within one year)
- Your monthly spend with Zillow is $4,000, and that nets you 20 leads a month
If all of this is true, you’re paying $200 per lead. If you’re closing one out of every 20 leads presented within 90 days, your cost per closing is $4,000. Given a typical commission of $9,000 ($300,000 x 3%), your cost per closing with Zillow Premier Agent is 44% of each commission.
But, when you factor in the nurture leads that will close within a year, your cost per closing drops to $1,333, or 14.81% of each commission.
Plus, you still have the other 17 leads you’ve collected over that time period to keep in your database, continue to nurture, and possibly capture referrals from down the road.
When you’re using Zillow Flex, you don’t get any of the back-end benefits of the leads you receive. You get a single lead, and if it closes, you pay on it. Your future benefit of Zillow Premier Agent using Zillow Flex is then limited to the possible repeat business from the lead Zillow provided, as well as any referrals they could send your way. The Zillow Flex fee ranges from 20% to 35%.
The bottom line is that the math is pretty clear here: Zillow Flex leads are significantly more expensive than traditional Zillow Premier Agent leads. Yes, the risk is lower since you’re not paying for them unless they close, but with lower risk comes a substantially lower reward.
2. Zillow Flex Consolidates More Control Over the Industry
Adopting Zillow Flex could result in Zillow having even more power. The real estate industry is already wary of the influence a single company has over the livelihood of more than 2 million active real estate agents.
The acquisition of broker licenses in all the states where Zillow Flex is available and the requirement that your managing broker also agrees to the terms and conditions of the program is a clear sign that Zillow is working on fortifying its emerging brokerage business model. This is something they swore up and down (and which we heard live from Rich Barton on stage in 2018) they weren’t going to pursue.
With the incredible market share advantage Zillow has in terms of consumer web traffic, becoming a full-fledged broker could give them an even more powerful position in markets across the country, making competing with them very difficult.
3. Zillow Flex Could Shrink Real Estate-supported Industries
With a lower profit margin on sales, Zillow Flex agents will have less discretionary income to spend on products and services they use to support their work. When agents have less to spend on things like marketing, you can expect to see a decrease in professional photographer contracts, less frequent professional staging, and so on.
For the real estate photographers, videographers, drone pilots, stagers, and other professionals who depend on real estate agents as clients, this could be bad news.
So, Is Zillow Flex Worth the 35% Referral Fee?
Given all we’ve learned about Zillow Flex, the feedback we’ve gotten from agents who’ve used the program, and the implications of transitioning to a Zillow-backed, referral-based fee model, for more agents, no, Zillow Flex isn’t worth the 35% referral fee. In fact, we’ll go as far as saying that, in the long run, Zillow Flex’s isn’t a net positive for the real estate industry as a whole.
That’s not to say that there is no application for their program. There are certainly real estate professionals out there whose pool of resources necessitates a low-or-no upfront cost lead solution, at least until they can establish a budget otherwise. Also, there may be instances when established agents, teams, and brokers will look to Zillow Flex as a means of expanding with little risk to an underlying business.
However, for the majority of agents, in the long run, we believe Zillow Flex isn’t the best choice for building a scaling, long-lasting real estate business.
Bringing It All Together
What do you think about Zillow Flex? Are you excited about this option coming to your market, or is this a big no-go for you? Tell us about your thoughts and experiences in the comments below!