A lawsuit filed in federal court Tuesday alleges Zillow illegally failed to disclose to shareholders that it was struggling to accurately predict home prices for its house-flipping business, which ultimately led the company to shutter the operation this month.

The suit, filed on behalf of shareholder Dibakar Barua, alleges that “misstatements and/or omissions” by Zillow executives drove up Zillow share prices that later plummeted when the company announced it would shut down Zillow Offers. 

Zillow did not comment on the allegations. “We’re aware of the suit that was filed today. We don’t comment on pending litigation, but we are reviewing the suit,” spokesperson Viet Shelton said.

Benjamin Nivison, the plaintiff’s attorney at the Seattle-based law firm Rossi Vucinovich PC, said in a statement Wednesday, “We believe that this lawsuit will vindicate shareholders who suffered significant losses because of the company’s irresponsible actions.”

Seattle-based Zillow said two weeks ago that it was shutting down Zillow Offers, the company’s attempt at iBuying, an algorithm-driven version of house-flipping. At the same time, Zillow said it would lay off a quarter of its staff. The company had thousands of homes it still needed to resell, many likely at a loss. Zillow reported a loss of $328 million in the third quarter, a loss of $1.29 per share.

“Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in,” CEO Rich Barton said during an earnings call Nov. 2.


Zillow shares sank 23% the next day, closing at $65.86, down from more than $100 the previous week. Shares closed at $62.72 on Tuesday. 

The lawsuit, filed in U.S. District Court in Seattle, is the first federal case regarding Zillow Offers filed against Zillow since the announcement, according to court records. At least two other law firms have asked shareholders to come forward as they investigate similar suits.

The complaint filed Tuesday points to positive statements made by Zillow executives earlier in 2021 about the flipping business. However, the filing does not appear to offer new details on how early Zillow executives knew they may shutter the business.

In earnings calls in May and August, Barton said Zillow Offers was “surpassing our internal expectations” and “continues to accelerate.” 

During a Sept. 13 industry conference, Chief Operating Officer Jeremy Wacksman said, “We were really encouraged to see while we saw these incredibly hot markets, the strength and the appeal for Zillow Offers just continues to grow and we’re even more confident now that this is going to be a service really in all-weather markets,” according to the complaint.


In late October, Zillow paused signing new contracts for Zillow Offers, citing “a backlog in renovations and operational capacity constraints” before announcing the deeper troubles in November. 

“As a result of these materially false and/or misleading statements, and/or failures to disclose, Zillow’s securities traded at artificially inflated prices,” the complaint says. 

The complaint seeks class-action status on behalf of an unspecified number of shareholders who acquired shares between Feb. 10 and Nov. 2. The complaint estimates affected shareholders could amount to “at least hundreds of thousands” of people.