I like this. At the worst, they'll probably back off. I would if I were them.
I'd also be sure to get in contact with Zillow's CEO over this. I wouldn't be surprised if the guys at the top have no idea these shenanigans are going on.
A UDRP or ACPA dispute costs nothing, or next to nothing. These are administrative provisions used to protect against domain squatting.
The so-called purchaser files a motion with the registrar, registrar reviews, and takes your domain. This is all before the courts get involved. No attorney fees or court costs required.
Accepting a purchase offer also shows bad faith. Basically it shows that the domain owner just wants to make money selling the domain to an entity that owns the trademark.
[Edited: Best Course of Action? Talk to a Lawyer.]
Definitely, it's an absurdly low amount for an important domain name, but at the same time they could probably win it in court without much trouble, I'd think.
It would cost them thousands of dollars to win the domain in court. Which means he can probably get ... thousands of dollars from them instead of an insulting $250.
Maybe he should sell it on SitePoint? (the PR comes free!)
I'd also be sure to get in contact with Zillow's CEO over this. I wouldn't be surprised if the guys at the top have no idea these shenanigans are going on.