Zillow Named as Defendant in Sixth Lawsuit In As Many Months

Zillow has been named as a defendant in a new class action lawsuit—the sixth time the company has been sued in as many months.

The suit alleges unethical practices that unfairly push American consumers towards its mortgage products. The case was brought on behalf of "consumers injured by Zillow’s unlawful referral and steering practices."

On Friday evening, a class action lawsuit (Armstrong v. Zillow Group) was filed against Zillow for its mortgage practices, covering "all persons in the United States who were referred to Zillow Home Loans (ZHL) by a Participating Agent, and obtained a mortgage loan from ZHL in connection with the purchase of residential property.”

The lawsuit alleges that Zillow has engaged in kickbacks to agents and brokers—handing over valuable customer leads—relative to the number of customers they sent to Zillow's mortgage financing arm, ZHL.

Moreover, two separate Zillow businesses—firstly ZHL, and secondly its Premier Agent and Flex programs—control lead distribution in Zillow's referral network to "pressure and incentivise" real estate agents, with the lawsuit stating, "[These agents] funnel homebuyers toward Zillow Home Loans while discouraging referrals to independent lenders."

Zillow is also accused of giving preferential treatment to agents who meet Zillow Home Loans quotas, "while those who fail to do so face reduced volume or removal from the program," forcibly creating a funnel in which "Zillow's strategy expands to the detriment of transparency and consumer choice."

Zillow’s mortgage business has doubled its revenues in the past three years. In the third quarter of 2022, Zillow's Mortgage revenues were $26 million. This year, it was $53 million, which itself was a hefty 36% increase on the same period in 2024. In its Q3 numbers released in October, Zillow also said Mortgages recorded a 57% annual increase in loan origination volume.

Plaintiffs are seeking “treble damages equal to three times the amount of any charge paid for the settlement services involved in the unlawful referrals."

It has been a worst-case-scenario six months for Zillow. In June, Compass filed for antitrust. In July, CoStar filed for copyright infringement.

In September, Zillow was sued twice, once by the Federal Trade Commission for antitrust in rentals, and then by a private homebuyer for deceptive practices and hidden fee structures. Then, in October, Attorneys General from five States filed for collusion to restrict competition in rentals.

It is a barely believable crossfire that, taken piece by piece, interrogates vast swathes of Zillow's business model. But will it affect Zillow's brand?

The suit lambasts Zillow for abusing its monopoly, creating unfair market dynamics, and punishing agents who don't commit to diverting leads back to the company's mortgage program, which was also called out for being "uncompetitive".

The following [abbreviated] extracts explain the core of the lawsuit.

Plaintiff...brings this action to halt Zillow’s ongoing violations of law...to secure appropriate relief for consumers injured by Zillow’s unlawful referral and steering practices in the provision of real estate settlement services.

Zillow’s policies and conduct violate the law in several clear ways.

First, Zillow’s exchange of valuable leads in return for mortgage sign-ups is a clear violation of Section 8(a) of the Real Estate Settlement Procedures Act (“RESPA”).

Second, Zillow’s practices are unfair and deceptive under the Washington Consumer Protection Act...because they create undisclosed conflicts that have the capacity to mislead reasonable consumers about the independence of Participating Agents and the neutrality of Zillow’s platform.

Third, Zillow aided and abetted breaches of fiduciary duty by Participating Agents. Zillow knew agents owe duties of loyalty, full disclosure, and impartial advice...Yet Zillow imposed ZHL quotas, monitored calls, used scripts, and ran leaderboards and coaching to induce agents to steer clients to ZHL— in breach to those duties.

Zillow is improperly wielding its monopoly power to exert enormous pressure on real estate agents, who are supposed to be acting as fiduciaries towards their clients. By doing so, Zillow is fundamentally cheating a carefully regulated system in order to win more of the mortgage financiang market [where] homebuyers do not get objective, clear-eyed advice from their trusted real estate agents.

Zillow’s system harms consumers, who are robbed of the disinterested advice of their fiduciary real estate agent, and instead are unknowingly steered towards ZHL’s limited and often uncompetitive mortgage products.

Consumers are routinely steered away from alternative programs that might better serve the consumer’s interests, such as first-time-homebuyer assistance. Zillow’s system ensures that agents’ financial interests are aligned with Zillow’s corporate goal of maximizing mortgage originations through ZHL, not with their clients’ best interests.

When a consumer clicks 'Contact Agent' or 'Request a Tour,' Zillow captures that information and assigns the lead to a Participating Agent chosen by Zillow rather than the property’s listing broker. This intermediary structure allows Zillow—not the listing broker—to control which Participating Agents receive buyer leads and to condition that access on performance standards, such as those tied to Zillow Home Loans.