Zillow Faces New Legal Challenge Over Commission Practices
In a significant legal development for the real estate industry, Zillow, the dominant home search platform in America, is facing a class-action lawsuit that could potentially reshape how the company operates its agent referral business. The lawsuit, filed by the same legal powerhouses behind recent successful antitrust cases against major real estate organizations, alleges that Zillow’s practices have harmed homebuyers by maintaining artificially high commission structures.
The legal action, initiated by prestigious firms Hagens Berman and Cohen Milstein in the U.S. District Court for the Western District of Washington, specifically targets Zillow’s “Flex” referral program. This program, which generated over $2 billion in revenue last year, allows Zillow to collect up to 40% of an agent’s commission when buyers use Zillow-referred agents. The plaintiff’s attorneys allege this arrangement creates a hidden cost structure that ultimately inflates home prices for buyers. “We believe Zillow is well aware of the potential for ill-gotten gains in this space and has sought to play fast and loose when real people’s basic need of housing is on the table,” said Steve Berman, Hagens Berman’s founder, emphasizing that even a company of Zillow’s size should be accountable for its actions.
At the heart of the complaint is the allegation that Zillow operates as a “monopoly” in online real estate search, commanding approximately 66% of the U.S. real estate audience share. The lawsuit claims Zillow’s interface deceives users when they click “Contact Agent” buttons on listings. According to the filing, buyers believe they’re connecting with listing agents but are instead routed to Zillow-affiliated buyer agents participating in the Flex program. This practice allegedly prevents buyers from negotiating more effectively on price, as they might if dealing directly with sellers’ agents. Moreover, the complaint argues that Zillow fails to disclose its substantial commission share to all parties involved in transactions, including both buyers and sellers who might consider this information relevant during negotiations.
The lead plaintiff, Alucard Taylor from Portland, Oregon, purchased a home in 2022 using a Zillow Flex agent. According to the complaint, Taylor “did not believe he had any other option than to use” the Zillow-referred agent to complete his purchase. The lawsuit further contends that the Flex program’s structure creates problematic incentives for participating agents. Since these agents must surrender up to 40% of their commissions to Zillow, they are allegedly motivated to “prioritize receiving his/her full commission at all costs” rather than negotiating the best deal for their clients. This dynamic supposedly contributes to maintaining high commission rates across the industry, as Flex agents resist commission reductions that would further diminish their already reduced earnings after paying Zillow’s referral fees.
The lawsuit also challenges Zillow’s recently implemented Listing Access Standards, which require properties to be posted on Zillow shortly after being advertised elsewhere. The complaint characterizes these standards as coercive tactics designed to ensure Zillow captures the maximum possible referral fees by controlling when and how listings appear on its platform. According to the filing, agents who fail to comply after three warnings lose the ability to post listings, effectively forcing sellers “to fire her agent and find someone else who will acquiesce to Zillow’s coercive tactics.” This policy allegedly serves to protect and enhance “the unjustly earned profits Zillow receives from its deceptive conduct.”
The potential implications of this lawsuit are substantial, as it seeks class-action status representing all U.S. homebuyers who purchased a Zillow-listed property using a Zillow-referred agent within the past four years. The complaint alleges violations of both the Washington Consumer Protection Act and the federal Real Estate Settlement Procedures Act (RESPA), and demands a jury trial with treble damages. While no specific monetary amount has been disclosed, the involvement of Hagens Berman and Cohen Milstein—the same firms that recently secured over $1 billion in settlements from the National Association of Realtors, Keller Williams, Anywhere, HomeServices of America, and RE/MAX in the Moehrl antitrust case—suggests this could become another landmark case for the real estate industry. As of the report, Zillow had not yet responded to requests for comment on the allegations.
