Homebuyers Sue Zillow Alleging Hidden Real Estate Sales Fees Inflating Costs
SEATTLE – Hagens Berman with co-counsel, Cohen Milstein, represent a proposed class of homebuyers in a class-action lawsuit against Zillow filed today alleging it leveraged its market dominance to illegally increase purchase price paid by homebuyers nationwide, violating consumer-protection laws.
The lawsuit was filed in the U.S. District Court for the Western District of Washington and accuses Zillow of “deceptive and illegal conduct,” naming four entities in total: Zillow Inc., Zillow Group Inc., Zillow Homes Inc. and Zillow Listing Services Inc. Attorneys believe Zillow’s conduct may affect U.S. homebuyers who used a Zillow agent. If you bought a home in the last four years using a Zillow agent, you may be affected. Find out more about your rights.
According to the lawsuit first, Zillow tricks prospective homebuyers into signing up with a Zillow agent through its website. If the sale goes through and a Zillow “Flex” agent is involved, that agent must pay Zillow up to 40% of the agent’s commission. “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 seller,” the lawsuit states. Zillow keeps the identity of Zillow Flex agents secret, leaving buyers unaware of whether their agent is a Flex agent.
“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,” the lawsuit states, adding that its policies and conduct constitute “unfair methods of competition” and violate state consumer protection law.
“Real estate is a unique marketplace where hundreds of thousands of dollars are routinely at play,” said Steve Berman, Hagens Berman’s founder and managing partner. “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. A company with its footprint is not too big to be held accountable, and we intend to support homebuyers who have been harmed.”
Hagens Berman recently secured more than $1 billion in settlements in a nationwide antitrust lawsuit against the National Association of Realtors and the nation’s four largest real-estate broker franchisors regarding commission rates.
Zillow’s Faulty Foundation
Attorneys say the popular residential real estate home search platform has monopoly power in the U.S. market for residential real estate online search services. According to its own estimates, Zillow has 66% of the U.S. real estate audience share, touting that 80% of consumers come directly to Zillow. Zillow’s own investor presentations show that its market dominance is twice as high as that of its nearest competitors, according to the lawsuit.
“Zillow didn’t get to its place of market dominance by presenting a better option or by winning over the hearts of the public, but through what we believe to be deceptive and illegal conduct carefully designed to stifle competition at the expense of its own customers,” Berman said.
According to the lawsuit, Zillow’s policies effectively require home sellers and their agents to post a property on its website within 24 hours of the agent publicly listing the property for sale. Zillow sends violations to the seller’s agent if this fails to happen, according to the lawsuit. If the agent receives three violations, the listing is banned from Zillow. Would-be home sellers could be reinstated on the platform if they chose a Zillow agent, according to the lawsuit.
Zillow further ensures market dominance by tricking potential homebuyers into signing up with a Zillow agent, thereby earning Zillow commission on the sale of the home. By presenting homebuyers with a prominent “Contact Agent” button on a property listing page, buyers believe they are contacting the listing agent, but Zillow actually provides it to a Zillow-affiliated agent. These prompts may also appear as buttons prompting the would-be buyer to “Request a Tour.”
“Prospective buyers who click on the prominent buttons naturally believe they are reaching out to the listing agent who was hired by the home seller to ‘list’ the property; in fact, the Zillow website interface is designed to fool them into thinking that they are contacting the listing agent, who would have information about the property for sale. This is a ruse,” the lawsuit states. “Zillow actually directs the buyer away from the listing agent, and redirects the buyer to a buyer agent who is working on a Zillow team, who lacks any specialized knowledge about the subject property, and who has agreed to pay the Hidden Zillow fees. In addition, Zillow Flex agents have agreed to pay the Hidden Zillow fees.”
The Zillow agent who pays for the lead then attempts to contact the buyer and insert themselves into the transaction between the buyer and the listing agent to extract a buyer agent commission – typically around 3% of the purchase price of the property, according to the lawsuit.
Zillow maintains recordings of all introductory calls between buyers and Zillow-affiliated agents who paid for their referrals. The lawsuit states Zillow agents on these calls do not readily disclose that they are not the listing agent, and sales of referrals or “leads” to real estate agents are Zillow’s primary source of revenues, which grew to over $2 billion last year.
Find out more about the lawsuit against Zillow on behalf of homebuyers.
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About Hagens Berman
Hagens Berman is a global plaintiffs’ rights complex litigation law firm with a tenacious drive for achieving real results for those harmed by corporate negligence and fraud. Since its founding in 1993, the firm’s determination has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.
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