Warren Walker shares a comprehensive article on an agreement between the National Association of Realtors (NAR) and listing sites and how this affects Zillow.
On March 15th, 2024, the National Association of Realtors (NAR) proposed a settlement to end the multiple lawsuits they were facing over the issue of how residential real estate commissions were set and shared. The NAR agreed to pay $418 million to help compensate home sellers in the U.S.
To make a long story short, the NAR agreed to no longer require a listing broker to offer and disclose any upfront compensation to a buyer’s agent. I have written previous articles on how this will radically transform the Property Technology industry. Today I will explain the dramatic effect it will have on Zillow in particular.
Currently, there are approximately 2.8 million licensed real estate agents in the U.S. To be fair, many of those are not that active and may only participate in the industry on a part-time basis. These licensed agents, particularly the agents focused on representing home buyers, are the core customers for Zillow’s buyer leads.
This is where the problem starts for Zillow. The NAR proposed rule changes will make it harder for buyer’s agents to get the traditional 3% commission on a residential transaction. Many are predicting the buyer’s agent commissions will drop significantly over time. To make matters worse, as it becomes harder for buyer’s agents to earn a living, they will leave the industry which will reduce the number of customers available to buy Zillow’s leads.
But it gets even worse. According to a William Blair survey from October 20, 2023, in which 166 residential agents were questioned about the industry some disturbing insights were revealed.
Key points include:
- Average marketing spend
- NAR commission rules changes
- Disturbing industry insights
Read the full article, Zillow’s Incredibly Shrinking Addressable Market!, on LinkedIn.