HOW DOES ZILLOW MAKE MONEY: The Business Model

How Does Zillow Make Money

Zillow is a real estate marketplace where users may search for rental and sale listings to find a place to rent or buy.
They make money through selling real estate agents advertising and upgraded profiles, issuing and reselling mortgages, and, historically, through Zillow Offers. You’ve probably come across Zillow at some point throughout your real estate transaction. It is one of the most popular real estate markets in the United States. But how does Zillow make money? Aren’t most of its tools free? Not quite. Here’s what you should know.

What Is Zillow?

Rich Barton, Lloyd Frink, Spencer Rascoff, David Beitel, and Kristin Acker created Zillow in 2004 in Seattle, Washington. Former Microsoft executives Barton and Frink Rascoff co-founded Hotwire.com, and Rascoff, Beitel, and Acker were all involved in the creation of Expedia. Zillow’s CEO is currently Barton.

To target local markets, the firm initially formed relationships with local newspapers to share advertising revenue on co-branded sites. They now primarily promote on their main website and through their app. They are the most-visited real estate website in the United States, offering users an integrated real estate experience whether they are buying, selling, renting, or financing a house. Zillow also provides loans. Zillow used to directly buy and sell homes through a program called Zillow Offers, however that practice was halted in 2021 due to huge losses.

With information on over 110 million homes in the United States, Zillow has proprietary algorithms that provide value-added insight, such as Zestimate, a home valuation model that estimates a home’s value based on public and user-submitted data, as well as its MLS listings and other location and market trends.

While Zillow began in the United States, it extended to Canada in 2018. They own a number of businesses, including:

  • Postlets is a platform for listing real estate online.
  • RentJuice is a software-as-a-service firm that provides solutions for promoting and leasing rental properties.
  • Buyfolio is a real estate marketplace.
  • Mortech, HotPads, StreetEasy, Trulia, DotLoop, Naked Apartments, and Showing Suite are also owned by them.

Who Owns Zillow?

Zillow went public on July 19, 2011, and trades on the NASDAQ under the ticker symbol (Z). However, ownership remains concentrated in the hands of the company’s executive leaders and early institutional investors.
Zillow has multiple consumer-facing brands, including Zillow Offers, Zillow Premier Agent, Zillow Home Loans, Zillow Closing Services, Zillow Homes, Trulia, Out East, StreetEasy, HotPads, and ShowingTime.

How Does Zillow Make Money?

Zillow earns money from three main sources. Homes, mortgages, and IMT are the three.

#1. Homes

Zillow makes the majority of its money from home sales. The company purchased and quickly sold houses via Zillow Offers. It was a win-win situation for both the sellers and Zillow. Given the stress that comes with selling a home, Zillow’s almost instant cash offer was a huge draw for sellers.

When Zillow purchases a property from a seller, it charges a 6% transaction fee. It also establishes a fee of 3.5% to 4.5% to pay taxes and other related expenses.
This industry is expected to generate $1.7 billion in revenue by 2020.

#2. Mortgages

With the purchase of Mortgage Lenders of America in 2018, Zillow became an authorized lender. Zillow reengineered the money lending instruments in a now-customary manner, resulting in Zillow Home Loans. Borrowers can use the facility to obtain a new loan or refinance their existing loans.

Depending on the loan terms, Zillow charges varying degrees of interest. To diversify its revenue sources, Zillow works with more than 50 additional lenders through its mortgage platform. When a lender is linked to a prospective borrower via Zillow’s platform, a fee is paid to Zillow. Furthermore, Zillow charges lenders to utilize its Connect Service service, which increases their chances of being found by lenders.

By the end of 2021, Zillow’s mortgage services had produced $246 million in income, a significant increase from $174 million in 2020.

#3. Internet Technology and Media (IMT)

The Internet and technology are key to Zillow’s business approach. As a result, they are understandably one of the factors employed by the corporation to generate money. In fact, Zillow began in 2006 by providing ready-to-use software and marketing services to real estate brokers and homeowners.

Zillow’s Premier Agents and Premier Brokers programs generate money for Zillow by generating leads for real estate professionals. Zillow also sells advertising services to landlords, builders, photographers, and other professionals.
In 2021, IMT’s income was declared to be $1.9 billion, up from $1.45 billion in 2020.

Zillow Subsidiaries, Acquisitions, and Exits

Zillow Group, Inc. has made 12 acquisitions, 5 investments, and 1 lead investment to date.

Profit and Revenue Figures For Zillow

Zillow reported $8.14 billion in revenue in 2021.
Because Zillow Group, Inc. is a publicly traded business, they are required by the Securities Exchange Act of 1934 to file continuous financial files with the United States Securities and Exchange Commission (SEC). All of Zillow’s publicly available financial records, including yearly reports, can be found on their website in the investor area.

What Is the Business and Revenue Model of Zillow?

Zillow produces money by combining several revenue models within their organization, which are as follows:

  • A business model focused on advertising
  • A business model based on subscriptions
  • The business model of software as a service (SaaS)
  • The business-to-business (B2B) model
  • A business model based on mergers and acquisitions (M&A).

What Is the Business and Revenue Model of Zillow?

According to Zillow’s Crunchbase website, the company has raised $96.6 million in five rounds of funding and has a market capitalization of $10.99 billion as of April 2022.

Other Zillow Group Businesses

Zillow Group owns a number of famous real estate websites and technologies that allow it to advertise its services to clients at various stages of the real estate process. Here are some of the other firms owned by Zillow Group.

#1. Trulia

Trulia functions similarly to Zillow. It is a real estate marketplace where buyers and renters may search a database for homes in their desired area. Trulia provides in-depth neighborhood ratings that tell purchasers about school districts, crime, and walkability in a certain region.

#2. Hotpads

Hotpads caters to tenants seeking a new apartment or house. The search engine was launched in 2005 and was purchased by Zillow in 2012. It is a member of the Zillow Rental Network and earns money using the same strategy as Zillow.
Hotpads charges $29 for background-checking services for landlords and rental managers. When you list a home on Hotpads, it will appear on Trulia and Zillow as well.

#3. RealEstate.com

RealEstate.com, another member of the Zillow Rental Network, is a real estate marketplace where first-time home purchasers can search for and find properties that meet their criteria. While the site caters to a specialized niche, experienced property purchasers will find it useful as well. It provides users with unique and comprehensive search tools that make it simple to choose a new home.

#4. Zillow Mortgages

Zillow Home Loans is a new endeavor launched by Zillow Group to create revenue by allowing home purchasers to fund the purchase of their new home on the same site where they found it.

Is Listing On Zillow Free?

You’ll be relieved to find that there are no fees involved with listing on Zillow by owner since the company wants to make the process as easy for you as possible. While posting and selling on Zillow is free, you may have to pay a commission to a buyer who works with an agent.

Keep in mind that even if you post your home for sale by owner on Zillow, you will still need to coordinate your title settlement. Rich’s all-inclusive smarter home selling solution includes free MLS listing and title settlement with a full-service concierge for only $699.

Is It Free to Post on Zillow?

It is free to list a home for sale on Zillow Florida, whether you are selling it yourself or through a professional real estate agent. If you sell your home and list it with Zillow, you will not be charged, but some of its other services and features will cost you money.
For FSBO sellers to advertise their properties on Zillow, there is no cost to list on the site.

However, because FSBO listings are not included in Zillow’s default search results, your home will not receive nearly as much exposure as those listed by Zillow for real estate agents.
If you want to sell your home on Zillow, you should work with a real estate professional. Only agents have the right to put your home on your local Multiple Listing Service (MLS), which immediately adds it to Zillow’s main feed (as well as hundreds of other real estate sites).

Realtors are unsurprisingly not cheap. Rich may be a better home-selling solution because it allows you to list directly on MLS for free and market your home on over 750 websites.

Is There a Fee for Listing on Zillow for Agents?

You will not be charged any Zillow listing fees if you advertise on Zillow. A Zillow rental listing, on the other hand, costs $9.99 per week per home. A $4.99/week charge will apply if you live in Alaska, Arkansas, Iowa, Kansas, Mississippi, Montana, North Dakota, Nebraska, South Dakota, or West Virginia.
For the first 30 days, your first rental property on Zillow is free.

Is Zillow Free for Real Estate Agents?

There is a free and paid version of Zillow for realtors. Premier Zillow for Agents is the paid version. Over 200 million unique visitors visit Zillow’s website each month to look at houses and select real estate agents to work with. Because so many prospects spend time on Zillow, advertising on the site for business makes perfect sense for real estate agents looking to grow their firms.

This is where the Zillow Premier Agent can help. By paying for branding and visibility throughout Zillow’s network of websites, Zillow Premier Agents are better positioned to be found. When visitors to Zillow’s website have questions about a property or want to book a showing, they can find a Zillow Premier Agent profile right next to properties in certain ZIP codes.

Is Zillow a Real Estate Brokerage?

To continue with Zillow Offers fees, the Zillow business model had to evolve from an internet portal that featured homes for sale to a brokerage where Zillow bought homes. However, with their announcement to exit the Zillow buy-and-sell business, their brokerage license may not be required for much longer.

Why Is Zillow Investing in Real Estate?

Due to the significant financial blow it took in 2021, Zillow is no longer selling Zillow-owned properties through its iBuying program.

Is Redfin a better option than Zillow?

Redfin is a key competitor in Zillow’s previous sales and home evaluations. Zillow is slightly more accurate than Redfin on a national scale. Redfin, on the other hand, is more accurate in some cities and states. Both estimates are somewhat accurate for properties that are now on the market, but they are substantially less accurate for properties that are not currently on the market.

Are Zillow’s estimations correct?

Zillow has tried to increase the accuracy of its Zestimates. Their website includes a median error rate and proportion of homes in the main metropolitan areas in the United States that are within 5%-20% of the anticipated sale price. Zillow has also signed contracts with a team of data scientists and engineers to assure the accuracy of their data.

Do Zillow listings go away?

Listings on Zillow do not expire. If you are working with an agent and your contract has been terminated or has merely expired, your home may be removed from MLS sites. Those selling their home as an FSBO have the option to alter or remove their listings as they see fit.

How Do You Use Zillow’s “Make Me Move” Feature?

The Zillow Make Me Move program allows potential home sellers to “list” their properties unofficially in order to gauge interest and contact possible purchasers. Prospective house sellers can use this service by simply selecting the Make Me Move option when marketing their homes. You must wait 72 hours after submitting your listing for approval.

Does Zillow Make Me Move work?

The Make Me Move function on Zillow lets customers who want to sell their property do so without having to commit to listing it. It is an excellent approach to test interest in your house and determine whether you are ready to sell formally.

Conclusion

Zillow generates money by selling advertising on Zillow.com and the Zillow mobile app to property management businesses that have vacancies, real estate agents who are seeking buyers and sellers, and mortgage lenders who are looking for borrowers. Additionally, it sells to general advertising, particularly those in the real estate industry.
While the failure of Zillow’s homebuying service has hurt the company’s earnings and reputation, the company still leads the online real estate industry.

References

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