Improving liquidity in the market, aka being a market maker, can provide an interesting advantage.
Zillow wins by buying an asset it has more information on the true market value of, then providing an easier, economies of scale on the associated services (inspection, legal, repair, etc), then being able to offer a standardized product to home buyers.
Buyers win from taking a lot of the uncertainty out of a transaction. And from possibly lower fees if Zillow decides to rebate a portion.
Let's not forget there's a standard 6% commission in US real estate transactions... most retail would kill to start with a 3% margin.
If Zillow has high confidence a home is underpriced, it makes sense to time arb that into profit when it can match with a buyer.
I never really understood this, the last time I sold a house in the UK the fee was 1.5% and only on my side, the buyer pays nothing.
2) In the UK, the buyer pays stamp duty (tax) on the purchase.[0]
3) You can put a bid on a property in the UK and it's non-binding (until exchange)[1]
In other words - very different markets with very different dynamics.
[0] - I forget the percent, but it's material. This effectively disincentives people from buying, making the market less liquid.
[1] - This is frankly ridiculous.
(I've bought and sold in both US&UK markets)