Zillow hit with expanded class action adding RICO claims 

The law firms behind the landmark Moehrl commission lawsuit have escalated their legal attack on Zillow, accusing the company of racketeering, "fraudulent" business practices and a coordinated scheme to inflate commissions and steer buyers to Zillow Home Loans.

An amended class action complaint in the case known as Taylor was filed on Nov. 19 in a Seattle federal court. It replaces the initial September filing — which focused on the Zillow Flex referral program — and expands the case significantly. It names 10 plaintiffs across eight states and adds Zillow Home Loans (ZHL) plus three real estate brokerages/teams as defendants: Oregon-based Works Industries LLC, Nevada-based GK Properties and The Frano Team, which is based in Florida.

Attorneys from Hagens Berman and Cohen Milstein now allege that Zillow "designed and operated a fraudulent enterprise" that tricks buyers into working with Zillow-affiliated agents, hides substantial referral fees, pushes agents to send business to ZHL in violation of the Real Estate Settlement Procedures Act (RESPA), and uses its market power to "monetize every step of the home-buying process — even if illegally."

Real Estate News has reached out to Zillow for comment.

A closer look at the allegations: The amended complaint adds two RICO claims, arguing that Zillow and participating real estate brokerages constitute an "enterprise" that uses deceptive digital funnels, scripted sales tactics and undisclosed fees to unlawfully keep commissions "high and inflexible." 

These claims raise the stakes by framing Zillow's alleged practices as a coordinated effort rather than isolated violations. 

Specifically, the filing argues that prospective buyers who click "Contact Agent" or "Request a Tour" believe they are contacting the listing agent but are routed to a Zillow Flex agent instead. Those consumers are then encouraged to sign a touring agreement that does not disclose Zillow's 40% Flex referral fees.

Additionally, the filing cites statements from Flex agents as evidence that "Zillow is illegally forcing agents to refer customers to Zillow Home Loans, in violation of their fiduciary duty as agents, and in violation of the Real Estate Settlement Procedures Act (RESPA)."

The amended complaint comes just days after NAR's delegate body declined to approve a proposal requiring real estate agents to disclose referral fees to clients.

New witnesses offer perspectives on Flex program: Accounts from 12 confidential witnesses, described in the filing as "current and former Zillow Flex agents," have also been added, expanding the mortgage steering/RESPA allegations.

Among the claims:

• Zillow uses Follow Up Boss to monitor calls and messages, "eavesdrop" on client communications and catch agents who recommend outside lenders.

• Zillow managers allegedly travel to offices to personally deliver instructions "they could not put in writing" about quotas.

• Flex agents who fail to meet quotas for referring buyers to ZHL face losing leads or getting kicked out of the program.

• ZHL "cherry-picks" highly qualified buyers, offers higher interest rates than competitors and provides inaccurate closing disclosures.

Those claims point to RESPA violations, according to the filing, which asserts that Zillow is "illegally both giving and receiving a 'thing of value' related to referrals" and "receiving a payment that is not in exchange for completing the property transaction."

Multiple Flex agents told investigators that they were dropped from the program specifically because they recommended lenders who better served their clients' needs, the filing noted.

Echoes of another recent case: The newly amended complaint comes just weeks after a separate class action accused Zillow of using "kickbacks" to boost its mortgage business in violation of RESPA and the Washington Consumer Protection Act.

Zillow allegedly pressured agents in its Premier Agent and Flex programs to steer buyers to ZHL for pre-approval. Agents who went along were rewarded with extra or higher-quality leads, while those who didn't risked losing access to the lucrative Flex program, the filing claims. Buyers, meanwhile, were allegedly steered toward ZHL without realizing their agent's business depended on it.