According to the complaint, Zillow pressures agents in its Premier Agent and Flex lead programs to send buyers to Zillow Home Loans for pre-approval of their purchase mortgage. Allegedly, agents who sent more customers to Zillow’s mortgage department for their pre-approval received additional or higher quality leads in return. If agents in the Flex program fail to send enough leads to ZHL for pre-approval, they are at risk of being removed from the program.
Plaintiff claims that buyers were sent
The plaintiff alleges that buyers were referred to ZHL for their pre-approval without being aware that a major lead source for their agent was dependent on it.
“Zillow’s system harms consumers, who are deprived of the disinterested advice of their fiduciary broker and instead unknowingly steered toward ZHL’s limited and often uncompetitive mortgage products,” the complaint said. “Zillow’s system ensures that agents’ financial interests are aligned with Zillow’s business goal of maximizing mortgage production through ZHL, and not with the interests of their customers.”
According to the complaint, Araba was “unaware of Zillow’s quotas, incentives or requirements that tie the agent’s access to Zillow to referrals or pre-approvals with ZHL.”
Additionally, the complaint alleges that Zillow knew that allegedly forcing Zillow Flex agents to send customers to ZHL constituted a breach of the agents’ fiduciary duties to their customers.
“The participating agents’ fiduciary violations caused consumers to incur borrowing costs, lose access to more favorable loan programs, and receive biased guidance from agents who appeared to act in their best interests but were influenced by Zillow’s financial incentives, which were not disclosed to consumers,” the complaint said. “Despite that knowledge, Zillow knowingly and substantially assisted the participating agents in the principal error of breaching their fiduciary duties.”
Seeking class action status
The lawsuit seeks class-action status for a proposed class of “all persons in the U.S. who were referred to ZHL by a participating agent and obtained a mortgage loan from ZHL in connection with the purchase of residential properties.”
The plaintiff seeks a jury trial, damages, and asks for injunctive relief preventing Zillow from continuing these alleged unlawful practices.
Last month, The Capitol Forum published a report claiming that their research and reporting shows that Zillow’s Flex program may violate RESPA. The report included detailed interviews with several real estate agents, many of whom claimed to be Zillow Flex agents, in which they said Zillow needed Flex agents to push homebuyers to use ZHL for pre-approval of their loans.
A Zillow spokesperson clarified that there are a number of factors that Zillow takes into account and that there are several requirements an agent must meet to be part of the Zillow Flex program. Zillow said this list of factors is examined when considering reducing the number of leads an agent receives, removing them from the program, or increasing the number of leads they receive.
In an emailed statement to HousingWire regarding the allegations in the Capitol Forum article, a Zillow spokesperson wrote that the company is “always focused on providing the best possible experience to consumers looking to buy, sell, rent and finance,” and is guided by its “commitment to operate responsibly and in accordance with applicable laws.”
“Our approach prioritizes transparency and consumer choice, so consumers get the information and services they want and demand at the right time during their real estate journey,” the spokesperson wrote. “Through our strong broker partnerships, continued product innovation and steadfast consumer advocacy, we continue to set a high standard for responsible engagement in the real estate industry.”
This isn’t the first time Zillow has faced allegations of a RESPA violation related to its mortgage program. In 2023, prior to ZHL’s launch, Zillow settled a class action lawsuit related to its mortgage co-marketing program. The program was also reportedly investigated by the Consumer Financial Protection Bureau (CFPB), but the investigation was dropped without the CFPB taking enforcement action.
Zillow did not immediately respond to HousingWire’s request for comment on the lawsuit.
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