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A recent class-action lawsuit targets Zillow, alleging that the real estate giant's agent referral programs deceive consumers and inflate home purchasing costs. The suit claims that Zillow's Premier Agent and Flex programs steer homebuyers towards affiliated agents rather than the property's listing agent, creating a system where buyers unknowingly pay higher prices and hidden commissions. This legal challenge underscores ongoing scrutiny within the real estate industry regarding agent compensation models and consumer transparency.

Zillow Faces Legal Challenge Over Agent Referral Transparency and Homebuyer Costs

In a significant legal development, real estate technology giant Zillow is confronting a new lawsuit filed on a recent Friday in a U.S. District Court in Seattle. The complaint alleges that Zillow's Flex and Premier Agent programs engage in deceptive practices, misdirecting homebuyers to Zillow-affiliated agents and potentially causing inflated home purchase prices.

The plaintiff, Alucard Taylor, who acquired a home in Portland, Oregon, in 2022 through a Zillow-connected agent, asserts that he believed he was directly contacting the listing agent when utilizing the platform's \"contact agent\" button. Instead, he was allegedly rerouted to an agent affiliated with Zillow.

Taylor is represented by Steve W. Berman, a partner at Hagens Berman Sobol Shapiro LLP, the same firm that previously handled the Moehrl commission lawsuit. The lawsuit contends that consumers, after being directed to Zillow-affiliated agents, are required to sign Zillow's Touring Agreement, which misleadingly states that agent services are \"free.\" However, the complaint argues that these agents still receive a commission upon sale, an undisclosed fact to buyers.

Furthermore, the lawsuit highlights that if the agent is a \"Flex\" agent, they are required to remit up to 40% of their commission to Zillow. This percentage, described as a payment to Zillow for services unrelated to the actual real estate transaction, is reportedly not disclosed to either the buyer or the seller. The complaint argues that directing buyers to the listing agent would enable better negotiation of purchase prices, as sellers would not incur additional commissions for a buyer's agent.

The legal filing also suggests that this arrangement incentivizes Flex agents to prioritize securing their full commission, potentially to the detriment of buyers in competitive bidding situations. It posits that sellers are consequently burdened with higher commissions, pushing up home prices for buyers. Zillow's \"listing standards policy,\" which mandates properties be displayed on Zillow within one business day of public advertisement, is also cited as a mechanism that allegedly contributes to Zillow's market dominance and \"unjustly earned profits.\"

The lawsuit claims that these actions constitute violations of the Washington Consumer Protection Act and the Real Estate Settlement Procedures Act (RESPA), and that Zillow has been unjustly enriched by profiting from these hidden fees. Taylor and his legal counsel are seeking class-action status for all U.S. consumers who purchased a property listed on Zillow while represented by a Zillow-affiliated buyer’s agent. They are requesting a jury trial, treble damages, disgorgement of Zillow’s profits, and an injunction to halt the alleged practices.

Zillow has not yet responded to requests for comment. This lawsuit follows Hagens Berman's investigation initiated in mid-August into real estate agent practices, which claimed to uncover \"deceptive practices\" impacting consumers nationwide and potentially causing home sellers to overpay.

This lawsuit brings to light critical questions about transparency and fairness in the digital real estate marketplace. It underscores the importance of clear communication regarding agent affiliations and commission structures, urging consumers to be vigilant and informed about how they are connected to real estate professionals online. For the industry, it highlights the ongoing need for ethical practices that prioritize consumer interests above all else, ensuring that technological advancements serve to empower, not mislead, homebuyers and sellers.