With approximately 250 million unique monthly visitors, Zillow is the most widely used real estate portal in the United States. It’s among just a handful of online real estate platforms that transformed the way Americans buy, sell and rent homes.
The company offers a free mobile and web app that provides significant detail on approximately 165 million homes. In the past, these listing data were available only to real estate agents in the industry’s Multiple Listing Services system.
Zillow also offers innovative products like the “Zestimate,” a machine learning algorithm that approximates a home’s value. The feature has a median error rate of 2% for active listings and 7.1% for off-market homes, according to Zillow.
Zestimates may increase seller profits by 4.16%, according to a 2023 paper by researchers at New York University, because the tool allows sellers to be more patient and set higher prices, then wait for buyers who truly value the property.
Zillow makes money by generating leads for real estate agents on the platform. If the agent converts that lead into a sale, Zillow takes a fee of up to 40% of the real estate commission.
“[The agent] will bid on a specific zip code to try and win a certain number of leads, and then it’s on them to go and convert those leads into successful transactions and customers,” said Nikhil Devnani, senior U.S. internet analyst at global equity and research firm Bernstein.
The median U.S. home sold for $410,800 during the second quarter, according to data from the U.S. Census Bureau and Department of Housing and Urban Development. In the U.S., a buyer agent’s commission traditionally accounts for 3% of the home’s sale price, or approximately $12,324 based on that median price. Zillow’s fee, in this scenario, would be about $4,930 — if the lead was generated with Zillow’s tools.
“If we can help more of those transactions happen, then we participate in the revenue in that transaction and we make more money,” said Zillow CEO Jeremy Wacksman in an interview with CNBC.
In 2024, Zillow reported annual revenues of $2.2 billion. Residential real estate activity, including lead generation, accounted for 71% of its revenues. Zillow also has a mortgage financing business called “Zillow Home Loans” and a rental advertising business.
Other online real estate portals and brokerages have criticized Zillow’s strong position in the industry.
Competing real estate firm Compass filed a lawsuit against Zillow challenging its listing standards, which require sellers to list homes on Zillow within one business day of them appearing on the industry’s MLS system — or risk not being able to list it at all on Zillow.
“They’re banning any agent and their seller who doesn’t list on Zillow in 24 hours. It’s like Amazon saying if you don’t give me your listing so I can monetize it and sell it for a 40% referral fee, I’m going to ban you,” said Compass CEO Robert Reffkin on CNBC’s “Squawk on the Street” in July.
Zillow and Compass will meet in court to present evidence for a preliminary injunction this month. Zillow, in a September note to real estate professionals, reiterated that if a property is marketed to some buyers, it should be marketed to all buyers.
In September, the Federal Trade Commission filed an antitrust lawsuit against Zillow and one of its competitors, Redfin, over a partnership the companies struck earlier this year.
The companies had agreed to syndicate Zillow’s rental advertising on Redfin.com. Zillow paid Redfin $100 million in the agreement, and Redfin later terminated its multifamily advertising division and laid off sales employees in that division.
In October, five state attorneys general filed a similar lawsuit, alleging that the agreement would result in an “almost total consolidation” in the rental listing market, which could lead to higher prices for apartment owners.
“Those apartment owners will then try to pass those costs on to the average renter,” said Arizona Attorney General Kris Mayes in an interview with CNBC.
In response to the FTC and state attorneys general complaints, Zillow said it is elevating fee transparency and investing in tools to streamline and defragment renting for both renters and housing providers.
A spokesperson for Redfin said the company disagrees with the FTC’s allegations and that the existing number of Redfin advertising customers couldn’t justify the cost of maintaining their rentals sales force.
Watch the video above to learn how Zillow makes money.
