A recent academic study analyzing Zillow Home Loans (ZHL)—funded by the portal’s rival, CoStar—offers a new analysis of how Zillow’s policies and practices allegedly affect consumers, on the heels of a class-action lawsuit claiming the company is violating antitrust laws through mortgage referrals.
The aforementioned lawsuit put Zillow in the hot seat by alleging the portal steered consumers to its home loans by requiring quotas from agents in its Premier Agent or Flex programs. According to CoStar, these allegations are what “compelled” the company to sponsor the study, which takes a deeper dive into Zillow Home Loans business.
“The widespread media outrage over Zillow’s alleged unethical tactics—coercing real estate agents to push buyers into overpriced Zillow Home Loans in violation of RESPA and fiduciary duties—compelled CoStar Group to commission a rigorous academic study,” a CoStar spokesperson said.
Looking at loans originated between 2022-2024, the study said that the “empirical findings suggest that ZHL borrowers pay significantly higher mortgage costs than they would pay to other lenders” over the life of a loan, which it refers to as “overcharges.” The lawsuit, filed by one of the same large antitrust-focused law firms behind the original commission lawsuits, alleged this as well.
Study funder CoStar is embroiled in its own lawsuit against Zillow for copyright infringement. CoStar has also not been shy about its goal to supplant Zillow’s dominance in the consumer real estate-search space with its own platform, Homes.com.
However, both CoStar and the study’s author, Georgetown economist Steven Salop, assert that while the portal provided funding, the outcome wasn’t contingent upon it. CoStar added that it “demands full peer review” for the study.
In a statement, Zillow said that the report “draws inaccurate and misleading conclusions,” and “relies on selectively chosen data and inadequate controls to produce a distorted view of Zillow Home Loans.”
The study stated that, on average, Zillow loans were “relatively cheaper” in 2022, running at an average of $1,043 lower than other lenders over the life of a 30-year loan. The loans shifted to “overcharges” in 2023 where they became on average $3,213 more expensive. Then in 2024, loans were $4,579 more expensive for an average loan size of about $337,000 for borrowers, which is “equivalent to paying a mortgage APR to ZHL that is 15 basis points greater than to other lenders,” according to the study. Essentially, if the $337,000 loan were held to maturity, a borrower would pay about $21 more per month. The number of loans originated in this period grew from 1,714 in 2022 to 5,972 in 2024, and the average loan size rose from $309,000 in 2022 to about $337,000 in 2024.
According to the study, the overcharges also “particularly impact low-income buyers,” as 37% of Zillow borrowers earn $80,000 or less per year versus 29% for all lenders, and 20% of Zillow borrowers earn $60,000 or less per year versus 15% for all lenders. For borrowers earning less than $60,000 per year, the average overcharge over the 30-year life of an average loan of $159,618 was $4,457, reports the study..
The study findings also show variations among races and ethnic groups when it comes to overcharges. On average, the overcharge for white borrowers was $3,099 on an average loan of $321,000, while for Asian borrowers it was $3,995 on an average loan of $413,330 and $5,362 for Black borrowers on an average loan of $282,832. Hispanic borrowers on the other hand saw a slight undercharge of $276 on an average loan of $320,100.
These values also increased in 2024 alone, according to the study, with a white borrowers’ overcharge at $4,943 on an average loan of $337,075, $6,417 for Asian borrowers on an average loan of $437,574, $8,225 for Black borrowers on an average loan of $285,192 and $851 for Hispanic borrowers on an average loan of $330,815.
As for VA and FHA loans, study findings show that both saw overcharges in 2024 as with other loans. VA loans saw a $7,279 overcharge on an average loan of $407,860, while FHA loans saw a $3,233 overcharge on an average loan of $319,153.
Points and disputes
Zillow, for its part, claims the study was insufficient and inaccurate, offering specific rebuttals to Salop’s methods and conclusions.
For instance, Zillow noted that the study analyzes data from the Home Mortgage Disclosure Act, which it claimed is not designed for market pricing comparisons or borrower-level impact analysis. Zillow also argued the study is flawed as it doesn’t include loan products, geography and borrower credit profile.
Salop says that the study did account for geography (in property location) and borrower age, but admits a possible “shortcoming gap” in the lack of credit scores. However, he explains that to make up for a lack of credit data he used “certain variables that are relevant for determining the credit score,” such as debt-to-income ratio and loan-to-value ratio of the house.
“Then there’s also another academic study that I cite in the study where the author took this HMDA database (Home Mortgage Disclosure Act) and they matched the loans with another database from Fannie Mae and Freddie Mac that has the credit scores,” he adds. “She very cleverly seemed to have matched the loans, so she was able to get the credit scores for the particular loans and she found that for her purpose, adding the credit score really didn’t change anything.”
While the author of that study was looking at a different variable, Salop says that their studies are very similar and he doesn’t expect that “having credit scores would have changed the results.”
Additionally, said Zillow, the study also does not account for differences in its business model to other lenders when compared to one another, as well as service levels, customer choice and non-price factors. However, Salop rebuts that “they can criticize that (the study) didn’t take into account certain features, but they don’t explain why they don’t charge extra if you account for those features.”
Salop also notes that while Zillow says the study doesn’t account for market volatility throughout 2022-2024, it shows that the overcharge has “gotten worse” from many undercharges seen in 2022 to many overcharges seen in 2024, despite an increase in the amount of loans originated yearly.
Zillow also adamantly maintained it is “committed to both fair lending and pro-consumer practices.”
“We have a robust fair lending compliance program and Zillow’s fair lending data is validated by third party experts, who also have said this report is not credible,” a spokesperson said. “We stand by our business model and have a long track record of helping buyers of all types navigate the home-buying process.”
Zillow also shared comments from Charles River Associates—a firm specializing in management consulting and economic litigation where Salop works as a consultant—which said the study “should not be used to draw conclusions regarding fair lending disparities because it lacks various key pricing factors” due to its use of the Home Mortgage Disclosure Act data, which federal regulatory agencies have “consistently emphasized.”
“Independent analysis performed by Charles River Associates’ fair lending experts as part of Zillow Home Loan’s proactive fair lending compliance monitoring program has consistently found no disparities in average mortgage loan pricing based on borrower race or ethnicity for the years studied by Mr. Salop,” said Dr. Marsha Courchane, practice leader of Financial Economics for Charles River Associates, in a statement.
She added that Charles River Associates’ fair lending analysis is “based on proprietary Zillow Home Loans data that includes a comprehensive set of non-discretionary loan-level pricing factors that are commonly used in mortgage loan pricing across the industry.”
Salop says, however, that this study was not done as a review of fair lending practices, as he says that is not his expertise; instead, he focused on the alleged overpayment, which alongside allegations that Zillow pressures agents to steer clients to Zillow Home Loans, is the basis of the looming lawsuit.
Still in the early stages, said class-action lawsuit is seeking $25,000 per person who alleged was harmed by this practice.
“I was not aiming at fair lending with (the study),” Salop says. “I was not focused on whether there was a fair lending violation. I was just doing a study to look at the prices that consumers paid. It was a statistical econometric study.”
