Lately, I’ve been getting a lot of questions about Zillow, including whether I use it to purchase leads, what kind of ROI it brings, and whether the site is worthwhile as an advertising tool at all.
Zillow is a great, user-friendly platform, but it does have some drawbacks. It doesn’t update in real time, for instance. There are a lot of listings our buyer clients might find on there that are shown as active on the site despite already actually being under contract or closed. This can cause a lot of frustration for consumers.
As for whether it’s worth it to purchase leads on Zillow, it depends on your market. I can tell you that if you visit the site’s advertising portal, it’ll actually show you the availability for each ZIP code as well as ROI projections based on how much you spend. I’ve found that these ROI calculations are pretty accurate. They have a lot of data to draw upon. According to Zillow, the average Realtor who purchases ZIP code leads through their site will see a 3% to 4% conversion rate. In other words, an agent purchasing a hundred leads would end up closing on three to four of them.
Some Zillow representatives have even claimed to see a conversion rate of up to 10%. This is fantastic, but you would really have to work your leads to see such high conversion. Having said that, the ROI Zillow estimates you will make on a specific ZIP code is based on a few different factors. It’s based on the average price point for the area and also the assumption that you are seeing a conversion rate of 3% or 4%.In addition, it also depends on how many leads you’re purchasing and how much those leads cost.
In our area, the average ROI that is shown across local ZIP codes is usually about 2.2x to 3.5x. The more expensive the ZIP code, the higher the cost per lead is. Consumers in these more affluent areas, though, may be more careful about giving out personal information and therefore more difficult to reach. It can be easier to convert leads in ZIP codes with lower price points, but you have to convert more leads to make the same amount of money when working with lower price points as opposed to higher ones.
The ROI you are willing to earn in your business is completely up to you. It’s all relative to the lead sources you could, or already do, invest in. However, returns look much different for single agents versus teams. Let’s say an average team will pay out 50% of their commissions to an agent. If that commission check is $10,000 and the ROI is 3x. If you’re investing $3,300 into 16 Zillow leads and you’re able to convert one, that $10,000 commission check is essentially a 3x return for a single agent.
However, if a team owner invests $3,300 into 16 Zillow leads and converts one, this is a pretty high conversion. The $10,000 commission check is then split between the agent and the team owner. So the agent gets $5,000 and the team leader gets $5,000. But if you look at the true revenue, which subtracts expenses from the net total, your ROI ends up only being 1.5x. In other words, you would be spending $3,300 to be making approximately $5,000 in total. For most teams, this simply isn’t worth it.
There are a lot of lead sources out there that can bring returns as high as 30x to 40x. A source that brings you a consistent rate of return is the obvious choice. It doesn’t make sense to allocate your resources into an investment that brings smaller returns. If you do plan on investing in Zillow, make sure you negotiate with them on getting either your 10 most expensive or 10 most recent listings for free. Getting the ROI on ZIP code leads from Zillow is all about striking an equilibrium.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.