Can performance based advertising fees work in real estate?

Zillow announced their new premier broker pricing model, where they take a percentage of the sales fee on closing. The call it Flex pricing — I just call it, lucrative! We’ve seen this before in South Africa, with Property24 testing out their success based fee (SBF) model: no upfront fees, you pay a fixed fee when the sale is made. They couldn’t make it work, maybe they launched the model too early? Will they (or someone else) try it again?

Based on Zillow’s success with this, it would certainly be very lucrative for other portals to follow suit. Zillow is known for testing new models with their clients, and as Zillow CEO, Spencer Rascoff noted, it is not an option to stand still:

They’ve ventured into the new iBuyer model and Wall Street is throwing serious cash at it (and the other iBuyer companies). They are now providing landlord rental payments and their acquisition of Dotloop ensures that they own the sales transaction. The performance based advertising model is just another way of securing more of the commission split and working with agents who are happy to part with higher fees, in exchange for minimizing upfront advertising fees and getting better exposure.

Zillow is covering all fronts, diversifying risk and providing a more options for consumers and their clients, and becoming the “go-to” platform for US real estate. I unselfishly messaged Spencer to look at South Africa and Namibia, and he replied “Maybe someday!”. I guess the next step for a company that size would be to venture internationally (like Uber and AirBnB)….so no surprise with the Canada announcement).

The traditional authority commanded by big franchise brands over decades is under serious threat. Zillow’s main challenger will be other technology first real estate companies and we will most likely see some top ‘commodity’ real estate brands fail, while others will re position themselves. Exponential change is a difficult thing to grasp, as we think linear.

Big franchise brands are fighting back with acquisitions too: Keller Williams bought SmarterAgent and infamously said that they aren’t a real estate company anymore. The iBuyer model was just brought in by Realogy (!).

To get back to the question “Can performance based advertising fees work in real estate (for portals)”. Yes it can, if the platform delivers the sales for the agents.

Facebook enters UK property listing rental market

Facebook is entering the UK property market via a partnership with Zoopla and OTM (We syndicate South African and Namibia listings to Zoopla too for our clients, providing their sellers with great UK exposure).

An interesting move seeing that Google also tried to capture real estate search via a Google Maps implementation 7 years ago. All the money in the world couldn’t make it work as the user experience failed.

I get a feeling that Facebook will fall into the same trap, but time will tell. Why would someone prefer using Facebook or Google Maps (or maybe Amazon soon seeing that they are now investing in prefabricated homes)?

Alistair Helm shared his views on this move and the potential impact on the New Zealand property market in this post. I agree that for a portal in the #2 or #3 position, such a JV with Facebook could be very lucrative.

Facebook’s property search user experience needs to triumph that of dedicate property sites to be a winner and to successfully replicate to other countries. If it works, it will put tremendous pressure on dominant portals.

Facebook made a smart more into rentals, as it is a more frequent transaction opposed to infrequent sales.

How ‘dominant agent syndrome’ poses a threat to sales values in an area

Ronnald Ennik shared his views on the impact of having a dominant agent in a specific suburb, and how it could potentially effect sales values:

When a single agent becomes the overwhelmingly dominant sales force in a suburb, homeowners should sit up and take notice — because it poses a threat to sales values in the area.

Could suburbs be ‘undersold’ when compared to adjacent neighborhoods? Interesting read.

The #2 property portals are….staying at #2

Research from Mike DelPrete shows how the #2 portals worldwide, are staying in the #2 position. In the US, Zillow.com is in fact opening a gap to Realtor.com when you look at their revenue growth.

Bottom line: If you want to play in the property portal space, you will need seriously deep pockets to challenge the #1.

Pre-qualification of buyers to make you more profitable

Working in the real estate industry, I see a lot of estate agents wasting time by working with unqualified buyers. There is not enough emphasis on pre-qualification of buyers to save you time and make your real estate model more streamlined and effective. A bond pre-approval certificate goes a long way in saving everyone time.

Lead forms on property websites asks for name and telephone details, but fails to ask the most critical questions related to the client’s financial position. Property search also fails to take into account the financial position of the person doing the home search and fails to take into account the highly variable rates & taxes, levies, water and electricity costs of neighourhoods that could make a home more or less affordable.

Spring has sprung in Jozi! Or have we dived straight into summer?? The lemon tree in my street is always first to announce spring.

I’m the CEO of www.entegral.net, I love working with my remote team to solve real estate problems. Questions everything.

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