Overview
The purchase or sale of a home, for most people, is the biggest transaction a person will ever make. This case addresses Zillow’s alleged exploitation of consumers in this important transaction by misleading prospective buyers into an elaborate scheme involving Zillow agents, Zillow Home Loans, Zillow Preferred Partners, and hidden fees, in violation of RICO, RESPA, and state consumer laws.
About the Case
Cohen Milstein represents individuals who bought a home through Zillow, a leader in the American residential real estate market, in a consumer fraud and RICO class action.
Plaintiffs claim that Zillow has monetized every step of the home purchasing process – and its market dominance – through an elaborate and deceptive scheme. When house hunters go to Zillow’s website and press the big button in bright blue lettering posted next to the house listing that says, “Contact Agent,” they are forced to sign up with a Zillow-affiliated buyer’s agent – not the listing agent. If the Zillow agent is part of Zillow’s “Flex” program, the agent is pressured to unlawfully steer the buyer to proprietary Zillow Home Loan products, regardless of whether they benefit the buyer.
Zillow furthers its scheme to defraud buyers by effectively forcing home sellers and their agents to post on Zillow.com within 24 hours, lest they receive a violation notice and be blocked from the site. This scheme is furthered through Zillow Home Loans, and a network of Zillow Preferred Partners.
Through this unfair and deceptive scheme, the plaintiffs claim that Zillow has unjustly enriched itself and obtained a windfall of ill-gotten gains.
Case Background
Zillow is the undisputed market leader in online real estate listings. In investment presentations, it notes that it has 66% of the U.S. real estate audience share – twice as high as its nearest competitors. It also promotes the fact that 80% of consumers come to Zillow directly.
Plaintiffs allege that Zillow’s ability to monetize this dominance is based on deceptive and illegal conduct. When potential buyers are on Zillow’s website, Zillow tricks them into signing up with a Zillow agent. If the agent is part of Zillow’s “Flex” program, Zillow gets 40% of the agent’s commission – a payment on the back end that is undisclosed to all parties involved.
When a house is for sale on Zillow, the Zillow website has a big button in bright blue lettering posted next to the house listing that says “Contact Agent”:
After clicking that button, potential buyers are asked to provide their contact information, which Zillow provides to a Zillow-affiliated agent. Buyers, however, naturally believe they are contacting the listing agent. Instead, they are routed to a Zillow-affiliated buyer’s agent, who arranges a tour of the home by getting the buyer to sign a “Touring Agreement.” This agreement promises the buyer that the agent’s services are “free,” but this is deceptive and not true: if the sale goes through, the buyer’s agent still receives a commission. In addition, if the Zillow affiliated agent is a “Flex” agent, he or she has to 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 the seller.
Through an integrated system, Zillow links its advertising, agent-referral, and lending operations so that the same consumer is captured and monetized at multiple stages of the transaction. In this unified transaction funnel, buyers and agents are guided through affordability tools, touring, and pre-approval services offered by Zillow. The funnel’s default paths steer users toward Zillow Home Loan and other Zillow-affiliated services, and Zillow Preferred Partners, there by furthering their revenue generation model and fortifying itself against potential litigation.
Plaintiffs claim that Zillow furthers its scheme to defraud buyers by effectively forcing home sellers and their agents to post on Zillow.com immediately after advertising the home for sale or face severe consequences, including Zillow banning the ad.
Plaintiffs on behalf of themselves and the proposed Class accordingly bring this lawsuit for Defendants’ violations of RICO, RESPA, the Washington Consumer Protection Act, Wash. Rev. Code Ann. 19.86 (the “Washington CPA”), and common law unjust enrichment, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty. Plaintiffs seek treble damages, single damages, injunctive relief, disgorgement, and the costs of this lawsuit, including reasonable attorneys’ fees.