A September class-action complaint against Zillow now includes racketeering allegations, according to court documents obtained by Inman.
The initial filing, which centered on Washington homebuyer Alucard Taylor, said Zillow’s Flex referral program violated the Washington Consumer Protection Act and the Real Estate Settlement Procedures Act (RESPA). The filing said Zillow isn’t forthcoming about the referral process, which includes connecting buyers with Flex agents, who pay a 40 percent referral fee. The complaint argues that the 40 percent fee “trickles down” to consumers through inflated commissions.
However, the amended complaint filed on Wednesday expands the scope of the complaint, adding eight plaintiffs from Washington, California, Michigan, North Carolina, Virginia, Georgia, Nevada, Florida, and Connecticut, and four new defendants, including Zillow Home Loans and three brokerages enrolled in Flex.
The most significant additions to the complaint are the expansion of Zillow’s alleged RESPA violations and the addition of a new Racketeer Influenced and Corrupt Organizations Act (RICO) count.
In the initial complaint, the RESPA violations centered on the alleged lack of transparency regarding how homebuyers are connected to Flex agents and the fees Flex agents pay to be prominently displayed on Zillow listings.
Now, the RESPA count focuses on Zillow Flex agents getting homebuyers preapproved with Zillow Home Loans.
“Many Zillow Flex agents know virtually nothing about the real estate process, or the neighborhoods in which they are showing homes, yet these same agents are falsely promoted as a ‘Top Agent’ on Zillow based solely on their participation in the Zillow Flex program,” the filing read. “Zillow’s requirement that Flex agents use Zillow’s ‘Follow-Up Boss’ allows Zillow to eavesdrop on communications between the agent and the buyer, violating the agent’s duty of confidentiality.”
“Zillow also uses the ‘Follow-Up Boss’ to ‘catch’ Flex agents who may recommend other loan providers to their clients, to censure them appropriately,” it added.
The RICO count, the filing said, is to account for brokerages’ participation in Zillow’s alleged scheme to inflate consumer costs.
“Zillow’s scheme hinges on cooperation from the Zillow Flex agents, and their collective ability to work together to fraudulently induce prospective buyers into using Zillow Flex agents,” the filing read. “By working together as part of an enterprise, and using the mail in furtherance of their fraudulent scheme, Zillow, along with three real estate agencies and other unnamed co-conspirators, who acted as brokers for three Plaintiffs’ sales, violated the Racketeer Influenced and Corrupt Organizations Act (RICO).”
The complaint, which ballooned from 29 to 73 pages, also includes screenshots and transcripts of alleged conversations between Zillow representatives and Flex agents regarding Zillow Home Loan referral quotas.
It also now includes testimonies from anonymous loan officers who claim Zillow “cherry picks” homebuyers with the best credit profiles and fails to educate buyers about the full range of loan and down payment assistance options, which they said “effectively steers buyers into higher-cost loans or disqualifies them altogether from purchasing.”
“Twelve current and former agents and loan officers have bravely stepped forward to help our clients build a comprehensive case against Zillow, and with their added information, we believe this lawsuit has the potential to bring major changes to Zillow’s policies and practices,” Hagens Berman Founder and Managing Partner Steve Berman said of the amended complaint on Wednesday.
Zillow was not available for comment Wednesday.
The amended complaint follows a growing list of lawsuits against Zillow, including a Nov. 7 class-action lawsuit filed in Washington District Court over Zillow Home Loans’ pre-approval quotas for Premier Agents and Compass’s complaint over Zillow’s Listing Access Standards. Both suits center on critiques about Zillow’s power, which plaintiffs both describe as “monopolistic.”
“Buying a home is typically the largest and most complex financial decision someone makes in their lifetime,” Berman said. “Zillow has sought to take advantage of homebuyers in a manner that is, in our view, illegal.”
