v3.25.4
Financial Instruments
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Financial Instruments Financial Instruments
We apply fair value measurements on a recurring and, as otherwise required, on a nonrecurring basis. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
•Level 3 — Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.
We apply the following methods and assumptions in estimating our fair value measurements:
Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets (Level 1). The fair value measurement of other cash equivalents is based on observable market-based inputs principally derived from or corroborated by observable market data (Level 2).
Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means (Level 2).
Restricted cash — The carrying value of restricted cash approximates fair value due to the short period of time that amounts are held in escrow (Level 1).
Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics (Level 2).
Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of MBSs that are utilized as economic hedging instruments is calculated by reference to quoted prices for similar assets (Level 2).
Contingent consideration — In December 2023, Zillow Group acquired Follow Up Boss for $399 million in cash, net of cash acquired, and contingent consideration of up to $100 million, payable over a three-year period upon achievement of certain performance metrics. During the year ended December 31, 2025, we paid $33 million in cash to settle the first earn out payment, most of which represented settlement of the acquisition date fair value. The fair value of the contingent consideration is estimated using a Monte Carlo simulation which considers the probabilities of the achievement of certain performance metrics (Level 3).
The discount rates used in our valuation of contingent consideration are based on our estimated cost of debt and are directly related to the fair value of contingent consideration. An increase in the discount rate, in isolation, would result in a decrease in the fair value measurement. Conversely, a decrease in the discount rate, in isolation, would result in an increase in the fair value measurement. The probabilities of achieving the relevant performance metrics used in our valuation of contingent consideration are directly related to the fair value of contingent consideration, as an increase in the probability, in isolation, would result in an increase in the fair value measurement. Conversely, a decrease in the probability, in isolation, would result in a decrease in the fair value measurement.
The following table presents the ranges and weighted average unobservable inputs used in determining the fair value of contingent consideration as of the dates presented:
December 31,
20252024
Discount Rate
Probability of Achieving Performance Metrics
Discount Rate
Probability of Achieving Performance Metrics
Range
5.18% - 5.34%
96% - 100%
5.70%- 5.87%
92% - 100%
Weighted average
5.26%98%5.81%96%
IRLCs — The fair value of IRLCs is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close. This adjustment is effected through the pull-through rate, which represents the probability that an IRLC will ultimately result in a closed loan. For IRLCs that are canceled or expire, any recorded gain or loss is reversed at the end of the commitment period (Level 3).
The pull-through rate is based on estimated changes in market conditions, loan stage and historical borrower behavior. Pull-through rates are directly related to the fair value of IRLCs as an increase in the pull-through rate, in isolation, would result in an increase in the fair value measurement. Conversely, a decrease in the pull-through rate, in isolation, would result in a decrease in the fair value measurement. Changes in the fair value of IRLCs are included within revenue in our consolidated statements of operations. The following table presents the ranges and weighted-average pull-through rates used in determining the fair value of IRLCs as of the dates presented:
December 31,
20252024
Range
47% - 100%
47% - 100%
Weighted average86%82%
The following table presents the changes in our IRLCs for the periods presented (in millions):
Year Ended December 31,
20252024
Balance, beginning of the period$4 $3 
Issuances94 54 
Transfers(92)(53)
Fair value changes2 — 
Balance, end of period$8 $4 
The following table presents the notional amounts of the economic hedging instruments related to our mortgage loans held for sale as of the dates presented (in millions):
December 31,
20252024
IRLCs
$402 $217 
Forward contracts(1)
$696 $300 
(1) Represents net notional amounts. We do not have the right to offset our forward contract derivative positions.
The following table presents the amortized cost, as applicable, and estimated fair market value of assets and liabilities measured at fair value on a recurring basis by category as of the dates presented (in millions):
 December 31, 2025December 31, 2024
 Amortized
Cost		Estimated
Fair Market
Value		Amortized
Cost		Estimated
Fair Market
Value
Assets
Cash$19 $19 $13 $13 
Cash equivalents:
Money market funds659 659 993 993 
U.S. government treasury securities90 90 75 75 
Commercial paper— — 1 1 
Short-term investments:
U.S. government treasury securities
369 370 594 591 
Corporate bonds
149 150 175 176 
U.S. government agency securities7 7 7 7 
Commercial paper— — 2 2 
Mortgage origination-related:
Mortgage loans held for sale— 386 — 159 
IRLCs - prepaid expenses and other current assets— 8 — 4 
Forward contracts - prepaid expenses and other current assets— — — 1 
Restricted cash5 5 3 3 
Total assets measured at fair value on a recurring basis
$1,298 $1,694 $1,863 $2,025 
Liabilities
Mortgage origination-related:
Forward contracts - accrued expenses and other current liabilities$— $1 $— $— 
Contingent consideration:
Contingent consideration - accrued expenses and other current liabilities— 33 — 33 
Contingent consideration - other long-term liabilities— 31 — 58 
Total liabilities measured at fair value on a recurring basis
$— $65 $— $91 

The following table presents available-for-sale investments by contractual maturity date as of December 31, 2025 (in millions):
Amortized CostEstimated Fair
Market Value
Due in one year or less$285 $286 
Due after one year 240 241 
Total $525 $527