The U.S. real estate portal giant Zillow is planning to expand its 'post pay' business model to two new markets in North Carolina. The cities of Durham and Charlotte will join the company's four existing 'enhanced markets' which are Atlanta, Raleigh, Denver and Phoenix.
Zillow is using these six locations to test a new way of doing business where agents only pay the portal after a lead transacts on a house rather than paying upfront for the lead.
Throughout most of the country, Zillow's flagship standard Premier Agent product charges agents upfront for leads and is available to any agent on a zipcode area basis.
In the enhanced markets, Zillow does not run its Premier Agent product and instead exclusively uses its Flex program where selected agents don't pay the portal upfront but do pay the company a success fee (typically 35% of commission) if and when a lead transacts.
It's not just Zillow's agent customers that have a different experience in the enhanced markets. End users in the six markets get what the company calls "real-time touring" and can book a tour of a home through the portal in less than an hour as well as greater integration of Zillow's Home Loans solutions.
Both the standard Premier Agent product and the Flex product are part of Zillow's main IMT business segment which continues to outperform a sluggish housing market.
The move to enhance the two markets of Durham and Charlotte means that Zillow will be choosing to discontinue relationships it has with many agent customers in those cities in order to work with a smaller group of higher performing agents on the Flex model.
Although the Seattle-based portal company has not given figures for how many agents will be kicked off its program, it did admit last year that "several hundred" agents would be removed from its Premier Agent program when rolling out the enhanced market program to Denver and Raleigh.
Although only it's only present in six metro areas for now, there are a lot of industry eyes on what Zillow is doing in its enhanced markets. The company has been periodically updating shareholders on the progress of what is seen as a pilot program that Zillow admits, may be rolled out further.
"With this select group of partners, we can work more closely to deliver a brand-aligned experience to our shared customers, quickly test new products and services, and evaluate in real time how things are going before we scale." From Zillow's Q1 letter to shareholders.
The program was first announced in April 2021 and its level of success over the medium term may well have a big impact on Zillow's business as it builds towards its 'housing super app' strategy and for the U.S. real estate marketing landscape in general.