End of 6% Commission era upends misleading Pricing Model used by Zillow, Portals

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2024-04-03 13:30:16

Zillow's 15-year reign as the leading real estate portal is in jeopardy. With the era of 6% commissions coming to an end, Zillow's monetization model will need an overhaul. Costar Group, 3x the size of Zillow Group, believes their Homes.com portal can unseat Zillow in 3 years.

The 6% commission model in American real estate has been the norm since the 1940s. The longevity of this model makes America an anomaly. Per Professor Norman Miller, real estate commissions fell in other developed countries as real estate markets moved online. In many other developed countries, buy-side commissions compress more than seller commissions, and in some cases almost vanish:

On March 15th, the National Association of Realtors (NAR) settled several lawsuits that alleged realtors conspired to keep commissions high. NAR has agreed to abandon the longstanding industry practice of Cooperative Commissions. Starting in July, home sellers will not have to cover the cost of the buyer’s agent.

Brokers are scrambling to launch new service models. The business models of technology companies serving the real estate must be reconsidered as well. And now Zillow, Realtor.com and Redfin face their most formidable challenger yet.

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