Zillow is moving full speed ahead with an ambitious expansion of its mortgage business, leveraging its housing tech innovations to potentially reshape how modern homebuyers finance homes.
In its third-quarter earnings report, Zillow Home Loans revealed an impressive data point: mortgage revenue increased 63% year over year in the third quarter to $39 million, which is primarily due to an 80% year-over-year increase in purchase loan origination volume to $812 million.
That’s an annualized $3.2 billion in purchase mortgage business, not far off a top 50 spot on the mortgage leaderboard. And the company has been hiring loan officers at a good clip over the last year, according to NMLS data.
The Zillow funnel
Everything starts at the top of the funnel. In the third quarter, Zillow attracted an average of 233 million unique monthly users across its apps and websites, according to its own metrics, while analytics company Comscore reported 116 million average monthly visitors for the same period.
No real estate platform in America gets more eyeballs. Not even close. But separating the serious buyers from the hundreds of millions of looky-loos has always been the challenge, particularly when the business focus was on advertising revenue from agents.
To that end, Zillow is pushing serious shoppers further down the funnel with its “enhanced markets” initiative.
Established in 2022, the program essentially combines a suite of tech tools, such as Flex, ShowingTime, Zillow Home Loans, Follow Up Boss, and Real Time Touring, to drive lead conversions alongside top agents.
The Seattle juggernaut has been ramping up Enhanced Markets over the past year. It has now replaced Premier Agent in 43 markets, and according to Modex, much of its mortgage activity is clustered around Dallas, Los Angeles, Atlanta, Raleigh, and Portland, Ore.
Through Flex, a successor to the longtime Premier Agent program, qualified agents get leads with higher chances of conversion success from Zillow’s team, all with no upfront cost. But there are some boxes to check and heavy costs to stomach: To remain in the Flex program, agents need to ensure they hit transaction targets, answer client questions, have communication monitored, and see that “60% of opted-in transfers engage with Zillow Home Loans.”
If a deal closes, Zillow will collect 40% of the agent’s commission.
The lead generation program is designed for top-producing agents and teams who spend thousands a month on Zillow leads. Zillow is hoping agents refer clients to Zillow Home Loans instead of their usual rotation of loan officers from outside mortgage companies.
The company said that in “Enhanced Markets” they’ve been in for more than six months, customer adoption rates for Zillow Home Loans “are in the mid-teens, with newer markets trending similarly.”
Zillow said they’re also seeing higher transaction conversion rates for agent partners working with customers who choose Zillow Home Loans, “as we help agents and loan officers together better serve customers when they’re ready to transact.”
In the company’s earnings call this week, CEO Jeremy Wacksman said the potential in the mortgage space is enormous. “Forty percent of all home buyers start their home shopping journey looking for a mortgage, and more than 80% of those buyers don’t yet have an agent,” he said.
Sounds like a possible RESPA kickback issue!