Homebuyers Sue Zillow in Class-Action Lawsuit for Concealed Agent Fees

A recent federal lawsuit claims that Zillow has been misleading homebuyers and inflating purchase prices using undisclosed fees paid by real estate agents. The lawsuit, filed in the U.S. District Court for the Western District of Washington in Seattle, targets Zillow entities and alleges that the company’s actions violate Washington State consumer protection laws.

According to the lawsuit, Zillow allegedly uses its dominant position in the market to inflate costs for homebuyers nationwide. The lawsuit could impact anyone who purchased a home using a Zillow-affiliated agent within the past four years. The plaintiffs claim that Zillow misleads buyers into working with company-affiliated agents through deceptive website design.

When users click on “Contact Agent” or “Request a Tour” buttons on property listings, they are redirected to a buyer’s agent who works with Zillow, rather than the listing agent representing the seller. These “Flex” agents are required to pay Zillow a commission fee of up to 40% if a sale is completed, a fee that is not disclosed to buyers or sellers. The identities of these Flex agents are kept secret by Zillow, leaving buyers unaware of the fees being paid to the platform.

The lawsuit draws parallels to the National Association of REALTORS (NAR) antitrust lawsuit, which also raised concerns about hidden fee structures and anti-competitive practices in the real estate market. Zillow claims a significant share of the real estate search market in the U.S., with a large number of consumers using its platform for property searches.

The lawsuit alleges that Zillow enforces compliance with its listing policies by requiring home sellers and their agents to post properties on the platform within 24 hours of listing publicly. Failure to comply results in violations, leading to listings being banned from the platform. Sellers can regain access to the platform by selecting a Zillow agent.

Zillow generates a significant portion of its revenue through lead sales to real estate agents, recording introductory calls between buyers and affiliated agents. The lawsuit claims that these agents do not make it clear that they are not the listing agent during initial communications. Zillow-affiliated agents pay for leads to insert themselves into transactions and earn a buyer’s commission, usually around 3% of the purchase price.

The lawsuit accuses Zillow of engaging in deceptive and illegal practices designed to stifle competition at the expense of consumers. The law firm behind the lawsuit has a track record of success in high-stakes real estate litigation, having secured significant settlements in previous cases against major players in the industry.

Homebuyers who used Zillow agents in recent years may be eligible to join the class action as the lawsuit progresses through federal court.