1. How as an active member of he developer community, you have enjoyed building useful tools which expand the reach of the Zillow brand.
2. How you have dedicated significant time and energy to this project, on the understanding that they provided the API to encourage enterprising and curious developers such as yourself to find new valuable ways to interact with Zillow.
3. You are a reasonable person, and would be willing to sell the domain for a reasonable amount.
4. What you think is a reasonable amount, and some simple calculations/reasoning supporting this number.
You might even say that you were surprised by the small sum the initially offered, but with the information given I don't think there's any reason to be too offended-they probably just threw something out there to see if it worked. I also think it's quite early to start talking about negative pr campaigns etc. as others are suggesting. That won't get you any extra money, which as I understand it is your goal at this point.
edit- to suggest maybe including something from their "about us" section to describe what you were doing; trying to "help consumers by giving them access" to information.
Also to note, while their tactics aren't particularly subtle or magnanimous, I do believe in giving some benefit of the doubt- especially until after you've seen their response to your thoughtful response.
edit2- in 1.) above, you probably don't want to say you're expanding the "zillow brand"- no reason to help their IP/trademark position. just say something similarly pleasant sounding.