‘It’s An Arms Race’: How Portals Are Adapting To The Commission Crunch

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In March, the National Association of Realtors settled the Sitzer | Burnett antitrust suit for $418 million.

As part of the settlement, NAR agreed to make two major changes: remove the cooperative compensation rule or Participation Rule, which requires listing agents to offer buyer’s agents a commission to list a property in a Realtor-affiliated multiple listing service, and require written agreements before a buyer’s agent can take a homebuyer on a tour.

In addition to upending how homesellers, homebuyers and their respective agents handle touring and negotiate compensation, the settlement also shifts the way the industry’s four biggest residential portals — Homes.com, Realtor.com, Redfin and Zillow — must approach their growth and survival.

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With the potential of a remarkable drop in commissions on the horizon, all four portals must do more than ever to keep their space on agents’ budgets by boosting their value propositions with the launch of new platforms like Zillow’s Listing Showcase or upgrade of existing platforms like CoStar’s acquisition of Matterport to eventually bring hyper-realistic 3D listings to Homes.com.

Beyond tools, they’re also guiding agents and consumers with new requirements, like Redfin’s coming introduction of a written buyer agreement or Realtor.com’s push to help consumers understand the true value of buyer’s agents.

“There’s a lot of locking of horns and a lot of public jabs,” said Stephens & Co. Managing Director John Campbell, who tracks CoStar, Redfin and Zillow among a group of 17 publicly traded companies. “It’s a bit of an arms race.”

“Agents should expect big transformational announcements from these portals, announcements that kind of foretell where the industry is heading,” he added. “It’s a super interesting time to be covering all these guys because we’ve already seen a lot of change, and it’s only getting started.”

Although the long-term effects of NAR’s settlement are yet to be seen, first-quarter earnings, Inman’s previous reporting, and interviews with industry analysts and strategists reveal the beginning of a new era for residential portals.

Zillow

Zillow has long held the residential portal crown, with its ubiquity among consumers fueling its homebuyer lead generation business, Premier Agent, and a strong portfolio of other brands including Zillow Rentals, Zillow Home Loans, Follow Up Boss, and ShowingTime+.

Upcoming changes to NAR’s cooperative compensation rule have led to questions about the potential end of Zillow’s reign as their model primarily caters to buyer’s agents, who could struggle to shoulder Premier Agent’s 40 percent referral fee.

However, Zillow has sweetened the pot on the buy side with Premier Agent Real-Time Touring, which enables buyers’ agents to quickly connect with high-intent homebuyers. When a buyer chooses a tour time on Zillow, they’re directly routed to the buyer agent — no live transfer needed — who has five minutes to confirm a tour time.

“These connections are routed directly to one agent at a time, with no live transfer, so agents can accept the connection even if they are unable to talk on the phone,” the company brief read. “Zillow routes Real-Time Touring connections to Premier Agent partners one at a time until we find an agent who can fulfill the tour time requested by the buyer.”

Real-Time Touring is on track to account for approximately 20 percent of connections by the end of 2024, with the tool reaching 120 markets by the end of May.

Beyond creating a more streamlined and less stressful lead generation experience for buyers’ agents, Zillow was the first to introduce a short-term non-exclusive touring contract, which aims to alleviate buyers’ agents’ and homebuyers’ concerns about meeting NAR’s buyer representation agreement requirements.

Zillow COO Jeremy Wacksman said the company has been testing “buyer agreement product flows” and that markets where buyer agreements are required before taking a buyer on a tour have “higher conversion rates” compared to the national average.

On the sell side, Zillow has leaned into ShowingTime+’s Listing Showcase, an AI-driven marketing stack for listing agents that provides interactive floor plans, virtual staging, image enhancement and in-app photography coordination and image management.

Showcase also enables agents to “claim” their listing — a feature that mirrors rising Zillow competitor Homes.com’s “Your Listing, Your Lead” appeal.

Zillow’s shareholder letter said Showcase leads to higher engagement, with agents using the platform getting 20 percent more listings than their peers. After they get the listing, they’re more likely to experience quicker list-to-offer timelines (20 percent more likely to receive an offer in 14 days), and higher sales prices (+2 percent, on average).

“Listing Showcase is sold to agents on a subscription basis, and each geographic ‘zone’ has a limited number of subscriptions available,” real estate strategist Mike DelPrete said of the platform in August. “The revenue opportunity is significant, measured in hundreds of millions of dollars per year.”

Listing Showcase is available to all agents.

Although what Zillow has laid on the table is intriguing, Stephens & Co. Managing Director and analyst John Campbell told Inman there is one major potential hiccup agents should be aware of.

Campbell said Zillow’s robust consumer base is a key component to keeping buyer’s agents, and a growing share of listing agents, on its side. However, the Federal Communications Commission’s push to close the lead generator robocall and robotexts loophole could make it more difficult for Zillow to leverage that power.

“When you get a lead that’s looking to get a mortgage, get insurance, or get a real estate agent, you can no longer get that lead and sell it multiple times to the highest bidder,” he said. “What you’re going have to have now is consumer consent to have their information sent to multiple providers.”

Campbell said the FCC’s rules could throw a big wrench in Zillow’s ability to maintain the seamless lead gen funnel that its Premier Agent partners have become accustomed to.

“For Zillow Premier Agents, it’s been such a long run of, ‘I can easily go out and buy you know a certain share of [a] ZIP code, a certain amount of the lead flow,’ and it was basically up to Zillow to connect that consumer with any agent that was paying the most,” he said. “That’s a big change that they’re gonna have to get around. Zillow Flex business would kind of help to some extent, but those are some political changes that are coming for sure.”

Meanwhile, Collabra Technology CEO and industry veteran Russ Cofano said Zillow is on the right path with Listing Showcase; however, he’s said they’ll need to “do more” to solidify their value proposition with listing agents.

“Listing Showcase is a great sort of entry point to sell their value proposition to listing agents,” he said. “I don’t think that’s enough, though. Zillow knows they have to find a way into seller lead generation and/or additional revenues around the listing side of the equation that goes beyond selling buyer leads.”

“I don’t think anybody knows what the future holds in terms of buyer representation. There are lots of opinions out there but nobody has a crystal ball,” Cofano added. “Zillow gets up and thinks about consumers, and how they can deliver a better transaction experience to consumers. Whatever they do will be aligned with that mindset.”

Homes.com

In the three years since acquiring Homes.com, CoStar Group founder and CEO Andy Florance has turned the platform into an attractive seller lead generation option with its “Your Listing, Your Lead” promise.

In the months leading up to the Sitzer | Burnett ruling, Florance theorized the decoupling of commissions would be especially advantageous for Homes.com and its focus on listing — rather than buyer’s — agents.

“The first-generation real estate portals leverage this threatened buyer-broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with a portal. Many agents and brokers strongly resent that model,” he said mere days before the Oct. 31 Sitzer ruling.

While “Your Listing, Your Lead” is still the bread and butter of Homes.com’s appeal, CoStar Group’s $1.6 billion acquisition of 3D scanning company Matterport is key to understanding Homes.com’s post-settlement strategy.

“When we speak with investors and the real estate community, some folks ask, ‘What’s the big deal with the Matterport acquisition?’” Keefe, Bruyette & Woods Managing Director Ryan Tomasello told Inman. “… Ten, 15 or 20 years ago only a small percentage of listings for homes and apartments even had photos. Now it’s the standard.”

Tomasello covers 11 real estate companies; however, CoStar Group is the only portal on his list.

“Imagine flashing forward five years where it becomes a standard practice for every listing of a residential or commercial property for sale or rent having a very immersive, digital twin accompanying it,” he added. “That adds more quality content and information around the property. It’s stepping from no pictures to pictures in a way.”

Tomasello said digital twinning — the term to describe the creation of hyper-realistic 3D listing experiences — isn’t new. However, CoStar Group has the dollars to expand the use of digital twins throughout its portfolio of listing sites and leverage it to grow membership, especially for Homes.com.

“This is all speculation on our part, but I expect they’ll include digital twins as an add-on for its different marketplace subscription packages at, in essence, no additional costs beyond what that customer might be providing just to upgrade to a higher premium tier,” he said.

If his hunch about CoStar Group’s Matterport strategy is correct, Tomasello said that would give Homes.com and the listing agents who use it a serious competitive edge.

“The share of listings with digital twins could end up being much higher than what you might see on other websites, which creates a feedback loop in that data,” he said. “There’s more agents using digital twins, more consumers expecting digital twins, that ultimately increases the adoption of digital twins, and also provides CoStar with a lot of data that it can utilize to increase the quality of the content across its products.”

This competitive edge will eventually come at a cost, with Florance teasing pricing changes in Homes.com’s future.

With the current pricing structure, which is influenced by the number of listings an agent has, the typical membership costs $450-500 per month. However, Florance said there’s demand for a premium membership that would enable an agent who has a listing “on page 30” to move that listing to “page 1.”

“We won’t look at doing premium tiers for a period of time until our penetration rates are in the teens and twenties,” he said in the earnings call. “We just want to focus on what is really important, which is getting that first level of membership in there.”

Tomasello said the introduction of new membership tiers wouldn’t undermine Florance’s main selling point for Homes.com, which is that it’s more cost-effective than other portals — a primary concern as agents brace for a potential drop in earnings.

“It’s really important to distinguish between outright price increases on existing products without any updates versus introducing additional products in tiers that come with higher price points in addition to maintaining the current price point,” he said.

Tomasello said CoStar has already employed this pricing strategy with Apartments.com, which has experienced a 10 to 20 percent compound annual growth rate in pricing over the past decade due to the introduction of new membership tiers.

“CoStar has not taken very much price in the form of outright increases with Apartments.com. Premium tiers get more listings on a marketplace. More exposure equals higher lead flow,” he said. “We think CoStar will utilize the same strategy for Homes.com and provide members even greater exposure than what they’re getting today.”

Realtor.com

Compared to its competitors, Campbell and Cofano said Realtor.com’s post-commission strategy isn’t as clear.

In Move parent company News Corp.’s latest earnings call, News Corp. CEO Robert Thomson highlighted Realtor.com’s rental syndication partnership with Zillow and the portal’s nationwide advertising campaign about the value of buyer representation.

As for new tools or updates to Realtor.com’s eight lead generation and marketing products, Thomson limited his comments to improvements for “the product and user experience” that will help the portal take advantage when “the market trends change from headwind to tailwind.”

Campbell said he was particularly impressed with the buyer advertising campaign breaking down the 111 tasks buyers’ agents handle, and said it could foster some loyalty with agents as the company aims to keep lead volume growing after two years of declines.

However, he said Eales and other Move leaders need to fight for more “airtime” to explain what they have up their sleeves strategically so agents can understand how Realtor.com’s current lead generation and marketing benefits them.

“One of the issues is that they’re tucked into a big conglomerate. News Corp. has multiple businesses,” he said. “They have less airtime with investors to articulate what they’re doing, which needs to change.”

A Realtor.com spokesperson expanded Thomson’s comments, saying its Listing Toolkit, Realtor.com PRO mobile app, and CRM integration are the cornerstones of their buy and sell-side offerings. The latter products have already undergone improvements, with Realtor.com seeing an increase in lead alerts per week.

“We have more improvements planned for the year ahead,” the spokesperson said in an emailed statement while noting their pricing structure is competitive to other portals. “We’ve developed a consumer campaign and agent toolkit to educate buyers on why the buyer’s agent is critical in real estate, and we’ll continue to evolve that campaign this summer.”

Cofano said Realtor.com needs to provide greater depth on what “they’re doing from a strategic standpoint,” however, Move CEO Damian Eales’ NAR midyear conference appearance caught his attention.

“It was interesting to see [Realtor.com] at the NAR [midyear] meetings aligning themselves with MLSs,” he said. “You have Zillow suing MLSs. You have Homes.com not giving a crap about MLSs and trying to gather their own data sets that potentially could compete with MLSs.”

At the conference, Eales reiterated Realtor.com’s support of NAR and Realtors, the latter of whom he called “heroes” and “pillars of the community” worth celebrating.

“The National Association of Realtors and MLSs will need to deliver more for members to remain relevant,” Eales said. “In our discussions with the NAR and MLSs, we have never felt more aligned. We are genuinely in this together. Realtor.com does not seek to disintermediate either the MLS or Realtors.”

“The National Association of Realtors, MLSs, and Realtor.com have a lot aligned,” Eales said. “We all want a strong Realtor brand, a strong leadership base … a system that supports both buyer’s agents and listing agents. We want to improve the professionalism of our industry. We can all do a better job to tell our story.”

Cofano and Campbell said Eales’ statements are effective in differentiating Realtor.com from competitors who have faced criticism for trying to undercut the role of agents.

“Realtor.com has to protect its industry relationship because that’s where it gets the fuel to generate its buy-side business,” Cofano said.

“What they’ve done in siding with industry is smart. They’re building that goodwill,” Campbell added. But will agents remember that in the future? I’m not sure.”

Redfin

Last, but not least, is Redfin which is guiding multiple ships through commission headwinds.

On the brokerage side, Redfin has found itself involved in two buyer-broker commission lawsuits, Gibson and a lawsuit seeking class-action status filed in the Central District of California in February.

Redfin settled Gibson for $9.25 million on May 6 and quickly redirected attention to its brokerage-arm initiatives “Sign and Save,” which gives buyers a maximum refund of 0.5 percent for signing an agency agreement, and the expansion of its commission-based payment model, Redfin Next, to 25 new markets.

On the portal side, Redfin has focused on Ask Redfin, an artificial intelligence-powered home search assistant integrated into Redfin’s Apple iOS mobile app.

Available nationwide since May 3, Ask Redfin answers questions about listings and a host of other homebuying topics. If the question requires a more nuanced answer than Ask Redfin can provide, it can immediately connect buyers with a licensed real estate agent — an option 10 percent of users took advantage of during beta testing.

Redfin CEO Glenn Kelman said the upcoming months will be focused on bringing Ask Redfin to Android devices and expanding the reach of Redfin Redesign, an AI tool that lets homebuyers change the appearance of walls, floors and countertops in home photos.

The portal will also introduce a NAR settlement-compliant buyer-broker agreement that homebuyers will see when requesting a tour this summer.

Campbell said Redfin often gets pushed to the periphery by non-Redfin agents and investors who are unsure of how to understand its value proposition as a brokerage and portal.

“[Investors] kind of group [Redfin] in the camp with RE/MAX, Anywhere Real Estate, and those guys when they’re more akin to Zillow or CoStar in that they aggregate absorbent amount of offline demand and bring it online,” he said.

“They give you the tools you need to be intelligent about the home-buying process,” he added. “They give you the agent, obviously, and they have a skilled national network of home touring where they can get you into homes to go look for yourself. They kind of have everything in place.”

Campbell said Redfin’s investments in Ask Redfin, Redfin Design, etc. undoubtedly add value to being a Redfin Partner Agent.

However, the introduction of Redfin Next could provide an even sweeter deal for agents who may be plotting a move. Redfin Next’s commission split in most markets is on par with the Redfin Partner Agent referral fee — making Redfin Next a potentially smart move if you’re already plugged in as a partner agent.

“From a compensation standpoint, the big benefit for Redfin is it gives you all the technology that comes with being an employee, you get benefits, you get all the technology, and most importantly, you get all the leads,” he said. “A lot of agents are spending a lot of money with them just like they do with Zillow, but instead of spending money with Redfin and buying those leads, you just become part of Redfin, you essentially get those leads for free.”

Email Marian McPherson