Legal Update: Zillow Faces New Class-Action Lawsuit Over Agent Leads

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Legal Update: Zillow Faces New Class-Action Lawsuit Over Agent Leads

By Dennis Riccio, President, Central Arizona Association of REALTORS®

A new class-action lawsuit has been filed against Zillow Group – the largest online real estate portal in the U.S. – alleging deceptive and illegal conduct in how Zillow steers homebuyers to agents in its network[1]. The case (Taylor v. Zillow Inc., filed Sept. 19, 2025) is led by the same plaintiffs’ attorneys who recently won a $1+ billion settlement in a high-profile antitrust case against the National Association of REALTORS®, underscoring the potential significance of this suit[2]. The complaint claims Zillow’s practices violated consumer protection laws (including the federal Real Estate Settlement Procedures Act) by tricking buyers and inflating home purchase costs[3]. CAAR has no official position on this litigation at this time, but we are closely monitoring it given the possible impacts on our industry. Here’s an overview of the lawsuit and what it could mean for Realtors.

Background: What Is Being Alleged?

The proposed class action was brought on behalf of homebuyers nationwide who contacted an agent through Zillow’s website and ended up using a Zillow-connected buyer’s agent[4]. According to the complaint, Zillow has leveraged its dominant market share to funnel buyers to its affiliated “Zillow Premier/Flex” agents instead of the listing agent, all while imposing hidden fees. Lead counsel Steve Berman stated that Zillow “has sought to play fast and loose when real people’s basic need of housing is on the table,” indicating the case is about holding a powerful company accountable[5]. In short, the suit paints a picture of a scheme that might be driving up costs for consumers without their knowledge.

Allegations of Hidden Fees and Steering

At the core of the lawsuit are a few key allegations about Zillow’s agent referral practices:

Deceptive Lead Routing: Zillow’s website features prominent “Contact Agent” and “Request a Tour” buttons on listings. The suit claims these mislead buyers into thinking they are contacting the property’s listing agent, while Zillow’s site actually funnels the inquiry to a Zillow-affiliated buyer’s agent who purchased the lead[6]. The complaint calls Zillow’s interface “designed to fool” consumers in this way – a “ruse” that diverts buyers away from the seller’s agent to a Zillow partner agent[6].
Undisclosed 40% Referral Fee: When a home is purchased through a Zillow-referred “Flex” agent, that agent must pay Zillow a referral fee of up to 40% of their commission. This hefty cut (nearly half the commission) is “never disclosed to the buyer or the seller,” according to the lawsuit[7]. In effect, Zillow is accused of taking a large, hidden slice of the agent’s commission without any disclosure or service to the client, raising questions under federal anti-kickback laws (RESPA).
Higher Costs for Consumers: The complaint argues that this hidden fee structure creates a conflict of interest and keeps commissions (and thus home prices) artificially high. Because Zillow agents lose such a big portion of their commission to Zillow, they are allegedly “motivated to prioritize their remaining compensation above their clients’ best interests,” and cannot afford to negotiate lower commission rates[8][9]. The lawsuit bluntly states that “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.”[10]

In practical terms, the plaintiffs contend that if a buyer worked directly with the listing agent (instead of a Zillow-introduced buyer’s agent), the transaction could potentially be negotiated with lower total commissions and a lower sale price for the buyer[11]. Under the current system, a seller typically pays both a listing agent and a buyer’s agent commission (often ~6% total). The suit claims Zillow’s model ensures that an extra middleman is always in the deal – keeping that overall 5–6% commission intact – whereas a buyer going straight to the listing agent might avoid a second agent’s fee and secure a better deal[11]. In short, Zillow is accused of secretly profiting from referral fees that ultimately may be coming out of homebuyers’ pockets[12][13].

Zillow’s Response and Denial

Zillow has forcefully denied the allegations and says it will fight the lawsuit. In a public statement, a Zillow spokesperson characterized the complaint as “fundamentally misrepresenting” how Zillow operates and “the value [Zillow has] delivered to buyers, sellers and real estate professionals for nearly two decades.” Zillow “plans to vigorously defend” itself, maintaining 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.”[14] In Zillow’s view, connecting consumers with a dedicated buyer’s agent (rather than the listing agent) gives consumers more choice and avoids dual-agency conflicts. The company asserts that its Premier Agent and Flex programs are about partnering with buyer’s agents to serve customers, and not about inflating prices. Zillow also notes that agent advertising and referrals are a longstanding part of the industry, and it contends there is nothing improper about its referral fee model (which it likens to a success-based advertising cost).

It’s worth noting that no court has yet ruled on any of these claims – the lawsuit was just filed in September and will likely take time to play out. Zillow has not (as of this writing) changed any practices in response, and the Premier Agent/Flex lead program remains operational. For now, Zillow’s official stance is that this suit is “without merit,” and the company emphasizes its commitment to transparency and choice for consumers[15]. We can expect a vigorous legal battle ahead, as Zillow defends its business model against these accusations.

Another Lawsuit: Zillow’s Listing Policy Faces Challenge
This new class-action isn’t the only legal scrutiny Zillow faces in 2025. Earlier this year (June 2025), real estate brokerage Compass sued Zillow in a separate federal antitrust case, alleging Zillow abused its market power with a policy that limits certain home listings on its platform[16]. Specifically, Zillow introduced a “Listing Access” policy in May 2025 that requires any home publicly marketed for sale to be submitted to Zillow’s site within one business day, or else Zillow will refuse to display it[17]. Zillow instituted this rule to discourage “private” or off-MLS listings that aren’t immediately available to the broader public. Compass’s lawsuit claims this so-called “Zillow ban” on private listings is anti-competitive – arguing that it coerces brokers (and their clients) into using Zillow and the MLS exclusively, thereby stifling alternative marketing strategies[18][16].

Zillow, for its part, denies Compass’s allegations and asserts that its policy is pro-consumer. Zillow argues that banning selectively marketed listings actually protects buyers’ choice by ensuring all publicly for-sale homes are on open platforms, rather than only shown to an exclusive clientele[19]. This clash highlights a broader tension: Zillow’s dominant role means its policies can effectively set industry norms, which some competitors and agents have begun to challenge in court. While the Compass-Zillow case is separate from the class-action lawsuit, both legal battles underscore the increased scrutiny on Zillow’s market practices this year. Zillow now finds itself defending two major lawsuits in 2025 – one filed by a competing brokerage, and this new one filed on behalf of consumers – each alleging that Zillow’s business strategies harm a fair and open real estate market.

Why This Matters for Realtors and Lead Services
For Realtors in our association, this litigation is significant because it targets the business model of a major source of client leads. Zillow is not only a popular home-search portal for consumers; it’s also a lead generation platform that many agents (perhaps even some of our members) partner with. The outcome of this case could reverberate across the industry. Here are a few potential implications to watch:

Changes to Referral Fee Programs: Zillow’s Flex model is essentially a referral fee arrangement – something not unique to Zillow. Other companies (from large portals like Realtor.com to agent-matching services and relocation networks) also connect buyers and agents in exchange for a portion of the commission. If a court finds that Zillow’s undisclosed referral fees violate RESPA or consumer protection laws, similar lead programs industry-wide may need to become more transparent or alter their fee structures to avoid legal risk. In short, the case could set a precedent affecting how leads and referrals are handled beyond Zillow[20].
Impact on Buyer Agent Roles: The lawsuit arrives at a time of broader re-examination of buyer agent compensation (as seen in the recent NAR commission cases). If the plaintiffs prevail, Zillow and others might have to disclose referral fees to clients or even reconsider how buyer agents are involved in the sales process. Buyer agents would remain crucial, but their relationships might need to be more openly explained to consumers. Realtors who currently pay for leads should stay aware that the legal landscape around referral fees is evolving.
Market Perception and Trust: Regardless of the legal outcome, the publicity around this case might make some buyers and sellers more cautious. Consumers could start asking more questions about agent referrals and fees. It’s a reminder for all agents to be forthright about how you acquire clients and how you’re compensated. Maintaining trust is paramount. If you do receive referred leads (whether from Zillow or any source), be prepared to explain the arrangement if clients inquire. Transparency can help reassure clients that their interests come first.

CAAR’s Position and Next Steps

At this stage, CAAR is not taking any position on the merits of the Zillow lawsuit – the claims are unproven allegations at this point. Our role is to inform you, our members, about important developments that could affect your business. We encourage you to keep an eye on this case as it progresses. We will provide updates if there are significant legal findings or if Zillow makes changes to its programs in response.

For now, the key takeaway is that industry practices around lead generation and commissions are under the microscope. This class action highlights the importance of transparency and consumer trust in real estate transactions. As Realtors, it’s wise to stay informed and prepared for possible changes. We’ll continue to monitor the situation closely on behalf of our members. In the meantime, don’t hesitate to reach out if you have questions or insights about how referral programs like Zillow’s affect your business. This is an evolving issue, and CAAR’s goal is to ensure our members understand the landscape and can adapt accordingly.

— Dennis Riccio, CAAR President

Sources: Recent reporting and filings related to Taylor v. Zillow Inc. [21][22][14][16].

[1] [4] [5] [15] [16] [19] [22] New lawsuit accuses Zillow of deceiving home buyers | Reuters