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Zillow is facing yet another lawsuit. Filed on Friday in U.S. District Court in Seattle, the lawsuit alleges that the portal tricks consumers into using agents affiliated with Zillow through its Flex and Premier Agent programs, resulting in inflated home purchase prices.
The suit was filed by Alucard Taylor, who purchased a home in Portland, Oregon, in 2022 using a Zillow-affiliated agent. According to the complaint, when Taylor clicked the “contact agent” button next to the listing he was interested in, he assumed he was contacting the listing agent, but instead he was routed to a Zillow-affiliated agent.
Taylor is being represented by Steve W. Berman, a named partner at class action litigation firm Hagens Berman Sobol Shapiro LLP, the same firm that represented plaintiffs in the Moehrl commission lawsuit.
The suit claims that when a consumer clicks the “contact agent” button on a listing on Zillow, they are directed to a Zillow-affiliated agent and not the listing agent of the property. It says that consumers are then directed to sign Zillow’s Touring Agreement, which “promises the buyer that the agent’s services are ‘free,’ but this is deceptive and not true: if the sale goes through, the buyer’s agent still receives a commission.”
“In addition, if the Zillow- affiliated agent is a ‘Flex’ agent, he or she has to pay Zillow up to 40% of the agent’s commission,” the filing states. “This cut of the commission paid to Zillow, for no services rendered related to the real estate sale, is never disclosed to the buyer or the seller.”
The complaint argues that if buyers were directed to the listing agent instead of a Zillow affiliated agent, “they would be better positioned to negotiate a lower purchase price, because the seller would not have to pay commissions to the seller’s agent and the buyer’s agent.”
“It also incentivizes Zillow Flex agents to prioritize receiving his/her full commission at all costs, even if the buyer loses the bidding process. Since the Flex agents only effectively receive a 1% commission from the purchase of a home (after paying the Hidden Zillow fees and commissions to their firms), they have no practical flexibility in negotiating a lower commission,” the filing states.
“Sellers are stuck with paying 6% commission (or more) because the buyer Flex agent is receiving such a paltry sum in return, thereby increasing the purchase price of the home for the buyer. Zillow’s scheme has the intent and the effect of unlawfully maintaining high and inflexible commissions that drive up the prices that buyers must pay.“
According to the complaint, Zillow has furthered its “scheme” through its listing standards policy, which requires sellers to make their property available for display on Zillow within one business day of publicly advertising the property.
“This policy effectively requires sellers and their agents to forgo using other initial methods to advertise the home sale. The effect of this policy is to inflate the unjustly earned profits Zillow receives from its deceptive conduct, as it continues to increase its dominance of the market,” the filing states.
The complaint claims that, through these actions, Zillow has violated the Washington Consumer Protection Act, the Real Estate Settlement Procedures Act (RESPA) and has been unjustly enriched by allegedly profiting from hidden fees.
The suit is seeking class-action status for all U.S. consumers who have purchased a property listed on Zillow and were represented by a Zillow-affiliated buyer’s agent.
Taylor and his counsel are demanding a jury trial and are asking the court for treble damages, disgorgement of Zillow’s profits and an injunctive relief preventing Zillow from continuing the practices in question.
In an emailed statement a Zillow spokesperson wrote that the company plans to “vigorously defend” itself against the allegations.
“This complaint fundamentally misrepresents how Zillow operates and the value we’ve delivered to buyers, sellers and real estate professionals for nearly two decades. Contrary to its claims, we stand by our long held belief that buyers and sellers deserve to have the choice to work with an agent who is committed to their best interests and only represents them,” the spokesperson wrote.
In mid-August, Hagens Berman initiated an investigation into real estate agent practices regarding home sale transactions. In a release, the firm claimed that its research had identified “allegedly deceptive practices” that it claims may have impacted consumers nationwide, violating their consumer rights and causing home sellers to overpay.
In a recent transaction, an agent refused to accept the seller’s offer of broker compensation, citing that the buyer’s failure to offer compensation to the buyer’s agent meant the seller would have to pay more to receive an offer. The seller was very unhappy with me for presenting this offer. Ultimately, the seller agreed, and the buyer paid more for the home than if the seller’s agent had accepted the initial seller’s offered compensation. I understood that with 40-50% being paid to Zillow and the brokerage taking another significant chunk of compensation, the agent had little incentive to sell my client’s home. I would be surprised if the buyer understood the economics of the transaction.
This is interesting indeed but the assertion about these programs increasing sales price is flat out false. They don’t understand the business nor the market dynamic. However, I have seen a Zillow Touring Agreement and I had issue with it because in my state I’m not sure is compliant. I don’t recall the one I saw said anything about their services being FREE as I would only hope Zillow is smarter than that.