By Lew SichelmanStaff Writer

An empirical investigation finds that borrowers using Zillow Home Loans pay statistically higher mortgage costs compared with similar borrowers at other lenders, resulting in significant lifetime cost “overcharges” on 30-year loans

A new report by Georgetown University Professor Steven C. Salop adds fuel to two lawsuits charging Zillow with deceptive practices by requiring or incentivizing “affiliated” real estate agents to steer their clients to the popular listing site’s mortgage lending affiliate, Zillow Home Loans.

The 40-page report says Zillow Home Loans “charges significantly higher mortgage costs than they would pay to other lenders.” The rate is higher on all types of loans, conventional and government-backed, as well as those offered to Black home buyers, the study found.

Zillow has yet to respond to a request for comment from NMP made over the holidays, but it has reportedly objected to the study, calling it flawed. The study “draws inaccurate and misleading conclusions,” it has said.

The study, conducted by Salop, a professor of economics and law emeritus, was funded by Co-Star, the owner of Homes.com, which is locked in a bitter battle with Zillow to become the country’s top listing portal. But Salop said the financial support was not contingent on the results of his analysis. “All analysis, opinions and any errors are my own and are not those of CoStar or any other person at any organization with which I am affiliated,” he said.

Based on HMDA data for loans originated between 2022 and 2024, and controlling for borrower demographics, loan characteristics and geographic and “temporal” factors, Salop concluded that Zillow borrowers paid about a 10% annual percentage rate on a 30-year conventional loan than they did with other lenders.

The higher APR amounts to a net present value (NPV) “overcharge” of some $2,900 on an average $321,000 loan held to term, the professor’s analysis found. For 2024 alone, the APR on such a loan originated by Zillow Home Loans was about 15 points for the year, amounting to an “overcharge” of about $4,600 on an average loan of approximately $337,000.

“The NPV dollar overcharge is higher in the earlier years both because of an increase in the incremental basis points and because the average loan size is increasing,” the report explained.

The analysis’ estimate for VA and FHA loans also found “significant NPV overcharges” for government loans, but only in 2024, not in earlier years.

Further analysis of 30-year conventional mortgages also found that the differences between Zillow and other lenders’ APRs for a comparable loan is larger “in percentage terms” for lower-income borrowers for each kind of loan, conventional, VA, or FHA.

Black borrowers paid “substantially” higher overcharges than the charges paid by White borrowers, the study found. Hispanics paid less than other borrowers in 2022 and 2023 but not in 2024.

The analysis shows that Zillow’s mortgages have become more expensive over the course of the 2022-2024 study period relative to other lenders.

“While Zillow’s loans were relatively cheaper in 2022,” the study found, “they became relatively more expensive in 2023 and even more expensive in 2024.

In 2022, the NPV of lifetime incremental cost of a Zillow mortgage held to maturity 一 and discounted at 6.5% per year approximately equal to the APR 一 would be $1,043 lower than those of other lenders, according to the study. In 2023, they became $3,213 more expensive, and in 2024, they were $4,579 more expensive on an average loan size of about $337,000 held to maturity

According to Salop’s analysis, Zillow originated 10,969 30-year conventional loans in 2022–2024. If each of these loans carries an overcharge of approximately $2,881, the total incremental cost to borrowers is approximately $31.6 million in present-value terms, he found.

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