Zillow faces another shareholder lawsuit alleging company executives misled investors about its failed house-flipping business.

A complaint filed in federal court in Seattle last week alleges executives made “false and misleading statements” about the success of Zillow Offers even as its efforts to renovate houses and predict their resale prices were floundering.

The Seattle-based company announced in November it would shutter Zillow Offers and lay off a quarter of its staff. The operation was Zillow’s attempt at iBuying, an algorithm-driven version of house flipping in which homeowners can get a near-instant offer on their house. 

Executives said at the time Zillow was failing to accurately predict future home prices. Zillow’s share price dropped sharply after the announcement, and the company lost more than half a billion dollars last year.

Shareholders have filed at least six lawsuits since.

Several of the cases allege the company failed to adequately disclose problems with Zillow Offers. Others say the company’s board of directors failed to implement internal controls and corporate governance policies needed to enter the competitive iBuying market. Five lawsuits have been consolidated into two cases.

The latest complaint alleges Zillow management “significantly increased the prices Zillow Offers would pay for homes in order to entice more home sellers to accept offers to meet Zillow’s volume goals.” The company ramped up home purchases last spring as part of an effort known inside Zillow as “Project Ketchup,” according to court filings and media reports.


The filing also claims Zillow was underpaying contractors, causing them to deprioritize Zillow jobs, which then left houses sitting in Zillow’s inventory for longer. All the while, company leadership “touted how successful Zillow Offers was,” the complaint alleges.

Zillow did not comment on the allegations in the latest complaint. But in similar cases, the company has argued that its executives adequately warned investors that Zillow Offers was testing an “unproven business model” and fine-tuning its price predictions.


As home prices skyrocketed in 2021, Zillow was initially underpaying for homes and trying to adjust its Zillow Offers pricing models assuming that price growth would continue, the company’s lawyers wrote in a motion filed in another shareholder case this month. But after it made those changes, growth in home prices “suddenly and precipitously declined” last year. That left Zillow overpaying for houses. 

Shareholders have cited media coverage in which anonymous Zillow employees said people in the company knew it was overpaying for homes.

Zillow argued the lawsuits fail to explain how executives benefited from the alleged fraud.


“Plaintiffs’ ‘theory’ boils down to the illogical claim that the Defendants hid the truth only to later confess to concealing information, but did not take advantage of their purported fraudulent acts,” Zillow attorneys wrote.

Zillow’s share price has continued to fall as the housing market has cooled.

Zillow lost about $528 million last year, up from $162 million in 2020. CEO Rich Barton made nearly $21 million, including a base salary of $670,000, or about 146 times the pay of the median Zillow employee, according to SEC filings.