Zillow hit with class-action lawsuit for undisclosed 40% agent fees in Seattle

A lawsuit has been brought against Zillow by a homebuyer from Portland, claiming that the real estate company engages in deceptive practices that raise commissions and home prices. The class-action lawsuit, filed in the U.S. District Court for the Western District of Washington, accuses Zillow of violating consumer protection laws, the federal Real Estate Settlement Procedures Act (RESPA), and statutes related to unjust enrichment.

The plaintiff, Alucard Taylor, who purchased a home in Portland in July 2022, alleges that he was misled by Zillow’s website design. When Taylor clicked on the “Contact Agent” button on a home listing, he believed he was contacting the seller’s agent. However, he was connected to a Zillow-affiliated buyer’s agent and asked to sign a “Touring Agreement.” This document claimed that the service was free, but Taylor later discovered that the agent received a commission, and if the agent was part of Zillow’s “Flex” program, up to 40% of that commission went back to Zillow as a concealed fee.

The lawsuit refers to these undisclosed fees as “Hidden Zillow Fees,” which the attorneys argue are in violation of RESPA as the company is receiving payment without providing services connected to property closings. Additionally, the lawsuit criticizes Zillow’s Listing Access Standards, which mandate that sellers’ agents must post homes on Zillow within 24 hours of any public marketing or face penalties. This policy, according to critics, compels agents and sellers to depend on Zillow’s platform, thus strengthening the company’s dominance in online listings.

By keeping commissions artificially high, the lawsuit asserts that Zillow is driving up home prices, making properties more costly for buyers. The plaintiff contends that if consumers had direct access to listing agents, they could negotiate lower prices and commissions. However, the current system incentivizes Zillow-affiliated agents to prioritize their earnings over the best interests of their clients.

The lawsuit aims to represent all U.S. consumers who purchased a home listed on Zillow between Sept. 19, 2021, and the present while being represented by a Zillow agent. It seeks damages, the return of profits, injunctive relief, and attorney’s fees. As of now, Zillow has not yet responded in court.