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Zillow is now in the referral business.

For the first time, Zillow is cutting in on real estate commission.

Zillow’s pilot referral program launched in Florida under Premier Broker, giving Zillow a cut of the commission of home sales.

Outside of this referral program, agents and brokers pay Zillow upfront for leads. But complaints from real estate agents have been coming in. I hear agents and brokers saying, “All the leads I get from Zillow are crap.”

Really, those agents aren’t doing enough follow up.

So now, Zillow is testing out a different approach. With the pilot in Florida, they are giving the leads to brokers for free, and when the deal closes, they will pay Zillow a referral fee.

Zillow will probably still scrub the leads, meaning they send leads that are ready to buy or sell now. Zillow has not stated what percentage of the commission they will receive.

This is smart business.

Zillow heard the complaints from agents. They also see how big the commission is on these leads, so they are going to take a percentage of that.

Everyone does this. All the brokerages get referrals for their leads, and there are more referral sites every year. They send you a lead, you accept it, and if it closes you give them between 20-40% of the commission.

Greg Schwartz, president of Media and Marketplace at Zillow Group, said, “You (brokers out there) told us it’s sometimes disruptive to pay for advertising in advance and you would advertise more if we could change the timing of the payments.”

I think agents would save money paying for leads upfront, and there are plenty of people crushing that model. Get better at follow up, get better at picking up the phone 100% of the time, get better in your own systems to make the most of these leads.

Are scrubbed leads better?

At a recent training, I had a conversation with a new agent. The brokerage told us, “We’re scrubbing these leads and giving them to you first.” He said, “I like it better the other way, when I have ALL the leads, not less leads that are scrubbed and ready to go.”

Why would he want all the leads, even ones who are only dabbling in the market?

Follow Up is Crucial

Because the 80% who are dabbling, with the right follow up, become clients down the road. You can put them in your pipeline, follow up on a drip, get a name and an email. Even if it is months or years down the road, those leads set up your future.

Here’s why brokerages, and Zillow, are scrubbing leads.

They give ready-to-go leads so that agents don’t complain about the quality of leads they recieve. Brokerages give out leads that are ready to buy or sell immediately, and keep that 80% pool of potential buyers and sellers that aren’t quite ready to go yet. From there, they continue to call and send information to the people who are dabbling in the market. So when they are actually ready, they go right back to the brokerage, the brand.

Bottom line is, with any type of lead, you’ve got to be good at follow up. You’ve got to be good at answering your phone. A lot of brokers know they can’t rely on their agent to do that.

What do you think of Zillow’s referral program? Let me know your thought in the comments.

Watch The Real Word 042 for more on this topic.