Zillow and Redfin May Be Steering Homebuyers Into Bad Deals
Experts warn that the one-click homebuying sites Zillow and Redfin are steering consumers to the platforms’ own mortgage lenders, squeezing out competition and discouraging buyers from finding cheaper options.
Zillow Home Loans mortgage signage is displayed in Downtown Phoenix, Arizona, on June 5, 2024. (Patrick T. Fallon / AFP via Getty Images)
Log on to real estate sites like Zillow or Redfin, and you’ll discover the era of one-click homebuying has arrived. You can search real estate listings, determine property values, and even buy or sell homes directly on the platforms. Now even the task of securing a mortgage, which used to take weeks of paperwork and phone calls, can be completed on the site just as easily as scrolling through a property’s photo gallery.
But experts warn this apparent efficiency is masking a system designed to steer homebuyers to the platforms’ own mortgage lenders, squeezing out competition and discouraging buyers from finding cheaper options. It’s part of massive consolidation and restructuring efforts by Zillow and Redfin’s corporate owners to corner the trillion-dollar mortgage market, which is already driving up housing costs and could heighten the risk of a financial crisis.
Regulators have even accused Zillow and Redfin’s parent companies of illegally rewarding real estate agents for directing buyers to their in-house mortgage lenders — something that the top consumer financial watchdog under President Joe Biden called a “kickback scheme.”
However, since then, President Donald Trump has blocked regulators’ attempts to crack down on these practices — allowing the corporations to continue edging out smaller mortgage lenders and limiting loan options for homebuyers.
Unbeknownst to many consumers, shopping around for a home loan can save homebuyers an average of more than $80,000 over a thirty-year mortgage. In states like California, Hawaii, and Washington, lifetime savings can reach more than $100,000. Consumers who use real estate companies’ in-house lenders may also be forced to pay higher fees and interest charges than those who use alternative options.
There is a significant financial incentive for big lenders to limit competition in the space: 80 percent of all homes purchased in the United States are financed with a mortgage, 40 percent of consumers begin their home-buying process by shopping for a mortgage, and 80 percent of those buyers don’t yet have an agent, according to Zillow’s 2024 annual report.
These pressures are reshaping the corporate identities of the industry’s biggest players. Zillow, which started as a home-valuation site, has been quietly refocusing its business around mortgage sales. Last year, the company reported an 80 percent jump in the amount of money it lent for new home purchases.
Meanwhile, Rocket Mortgage, the country’s second-largest mortgage lender, is edging into Zillow’s home-search market. In July, the lender’s parent company acquired the real estate brokerage website Redfin, which it has already used to funnel hundreds of thousands of homebuyers into its mortgage operation.
In essence, both real estate giants are engineering mortgage traps under the guise of one-stop-shop convenience, said Gordon Miller, founder of Miller Lending, which finances home mortgages in North Carolina, South Carolina, Virginia, and Michigan.
As Miller put it, “This whole industry is nothing but one big kickback.”
The Great Homebuying Consolidation
Traditionally the housing market has operated as a fractured industry in which homebuyers interact with a variety of stakeholders, from real estate agents and home insurers to appraisers and mortgage lenders. But over the years, two of the industry’s biggest names, Rocket and Zillow, have been positioning themselves to control every step of the home-buying process.
In 2018, Zillow — the largest real estate platform in the country — bought Mortgage Lenders of America, an online mortgage lending platform, which was then rebranded as Zillow Home Loans. These loans can provide financing for people looking to buy or refinance a single-family home, townhome, condominium, second home, or investment property.
In 2024, Zillow’s mortgage revenue grew rapidly, increasing by 51 percent to $145 million, according to the company’s annual report. The report also noted that the company’s success depends on making “real estate transactions faster, easier and less stressful for our customers,” along with providing “value to real estate, rental and mortgage professionals, homebuyers and sellers and our other real estate partners.”
“The driver of Zillow’s recent improvements has really been mortgage,” John Campbell, an analyst at the Arkansas-based investment bank, Stephens Inc., told HousingWire earlier this year. “We believe that Zillow could well be on its way to becoming a top-20” mortgage lender.
The massive real estate conglomerate Rocket Companies followed suit this March by acquiring Mr. Cooper, the largest mortgage servicer in the country, which handles day-to-day management of home loans. It’s expected that together, Rocket Companies and Mr. Cooper will oversee $2.1 trillion worth of home loans and nearly ten million clients, representing one in every six mortgages.
Three months later, Rocket Companies bought Redfin, one of Zillow’s closest competitors in the online home search market, with more than one million property listings. In an earnings call this July, Rocket Companies’ CEO Varun Krishna told investors that as a result, Redfin’s fifty million monthly consumers “creates new purchase opportunities from both directions: from Redfin to Rocket and Rocket to Redfin.”
That vision is already materializing. In just the first three weeks following the acquisition, nearly 200,000 people clicked the new “Get Prequalified” button on Redfin house listings, which directs them to Rocket Mortgage. Overall Rocket expects to generate more than $60 million in revenue by 2027 by pairing homebuyers with Redfin agents and steering those agents to Rocket Mortgage, according to a company press release.
“Find it on Redfin, finance it with Rocket Mortgage,” Rocket’s website reads. “We’re simplifying your journey home.”
To juice their mortgage sales, these real estate giants have been accused of offering real estate agents leads to properties and clients in exchange for steering homebuyers to their in-house lenders.
“Zillow has an unwritten rule that if a realtor gets a lead, they have to steer the customer to Zillow home loans or they don’t get leads,” Miller, founder of the mortgage company Miller Lending, told Residential Club, a housing analytics website, this March. “Rocket will likely do the same model [with Redfin].”
Critics say this policy can also involve punitive coercion.
“I know real estate groups that have been threatened to have leads taken away if they don’t send enough [homebuyers] to Zillow Home Loans,” said John Toth, Michigan branch manager of Miller Lending. “I’ve heard managers saying that their Zillow metrics aren’t up to speed.”
Rocket and Zillow did not respond to requests for comment before publication. But some real estate experts dispute the idea that these companies are engaged in kickback schemes.
Such claims have “created bad PR that was not accurate in any shape, way, form, or fashion,” said an attorney who previously represented Quicken Loans (now Rocket Mortgage) and asked not to be named to avoid professional repercussions. He noted that, in his experience, less than 15 percent of homebuyers end up using the companies’ in-house mortgage lenders, noting that “a lot of real estate agents want to use their own local lender, not a national lender,” because they don’t want an out-of-state company jeopardizing their real estate commission.
The attorney added, “If consumers don’t like the [mortgage] loan officer, or whoever is involved in the process, they’re gone.”
“All Bets Are Off”
Over the years, there have been repeated efforts to curb housing giants’ consolidation efforts.
In 2015, the Consumer Financial Protection Bureau (CFPB) started investigating Zillow, warning the company that its “co-marketing” plan — where real estate agents and mortgage lenders pay for premium placement on the site, with lenders covering part of an agent’s advertising costs — violated the Real Estate Settlement Procedures Act. The 1974 law prohibits the giving or receipt of money or gifts in exchange for mortgage loan referrals, in order to protect consumers from deceptive business practices and unnecessarily high homeownership costs.
However, the first Trump administration declined to pursue the case in 2018.
The investigation did lead to two lawsuits from shareholders who claimed the company failed to notify them that the company’s co-marketing program might be illegal, resulting in a $15 million settlement in 2023. Regardless, Zillow maintained they did nothing wrong.
The following year, the consumer protection agency used the same law to sue Rocket Homes for giving real estate brokerages referrals and other incentives in exchange for steering homebuyers to Rocket Mortgage and Amrock, another Rocket affiliate that handles title, closing, and escrow services during the homebuying process. Rocket also allegedly pressured real estate agents not to share information with buyers about products not offered by Rocket Mortgage, including down-payment assistance programs that could save homebuyers thousands of dollars, according to the lawsuit.
“Rocket engaged in a kickback scheme that discouraged homebuyers from comparison shopping and getting the best deal,” former CFPB director Rohit Chopra said at the time. “At a time when homeownership feels out of reach for so many, companies should not illegally block competition in ways that drive up the cost of housing.”
But that lawsuit was dropped this February, just weeks after Trump largely curtailed the Consumer Financial Protection Bureau’s operations by laying off more than 1,400 staff members and firing Chopra.
Nevertheless, lawmakers are still sounding the alarm.
In a June letter sent to government officials, a group of Democratic senators argued that the Rocket Company mergers “may reduce choice and raise prices for American families in the housing market.” They also urged the Department of Justice and the Federal Trade Commission — both of which enforce antitrust laws and prosecute deceptive business practices — to more “closely scrutinize Rocket’s acquisition spree as a whole for anticompetitive harms to small businesses and consumers in the housing market.”
Such policing has yet to happen.
The lack of oversight may persuade other real estate conglomerates to follow in Zillow and Rocket’s footsteps, say experts.
“If we see Rocket and Zillow having success with this, I think we will see even more players start thinking that they need to offer some sort of embedded mortgage or finance option,” Luca Dahlhausen, CEO of Realfinity mortgage platform, told HousingWire. “Because otherwise they may lose those buyers to another firm who is already doing those things.”
Miller Lending’s founder has similar concerns. As soon as the CFPB was dismantled earlier this year, Miller said to himself, “Wow, all bets are off.”
According to Miller, that’s bad news for homebuyers.
“That’s what [the Real Estate Settlement Procedures Act] was designed for — to not have mortgage people or real estate people steering you because of money,” he said. “There’s no concern for the buyer and trying to get the best deal for them.”