Zillow has been slammed with yet another lawsuit — this time for allegedly incentivizing its affiliated agents to pressure homebuyers into using Zillow’s mortgage business.

The Seattle-based real estate giant is most known for its real estate listing website, but it is also a brokerage and lending agency.

In a lawsuit filed last week with the U.S. District Court for the Western District of Washington, a homebuyer in Alaska claims her Zillow-affiliated agent led her to believe a mortgage loan from Zillow Home Loans was her only option. She did not know how her agent stood to benefit from the referral, her attorneys with Tousley Brain Stephens wrote.

The Seattle law firm claims, starting around 2022, Zillow-affiliated agents began steering their clients toward preapproval with Zillow Home Loans in explicit exchange for valuable customer leads, an incentive that is not disclosed to buyers.

Zillow-affiliated agents who fail to meet certain quotas face reduced client volume or removal from the referral program — called Zillow Flex, the law firm claims.

The attorneys claim Zillow’s actions violate the Real Estate Settlement Procedures Act, which bans giving or accepting business referrals involving federally related mortgage loans in exchange for something of value. They also allege the practice violates the Washington Consumer Protection Act, and that it aids and abets breaches of fiduciary duty by real estate agents.

“Zillow is fundamentally cheating a carefully regulated system in order to win more of the mortgage financing market, and the result is that home buyers do not get objective, clear-eyed advice from their trusted real estate agents,” the attorneys wrote.

The plaintiff’s attorneys are seeking class-action status for the lawsuit, unspecified financial compensation and for Zillow to give up any profits gained from the practice.

Zillow did not respond to a request for comment Wednesday.

In a recent letter to shareholders, Zillow said more buyers choosing financing through Zillow Home Loans is the main growth driver of its mortgages revenue, which increased 36% year over year to $53 million in the third quarter of 2025.

At the same time, Zillow is boosting the number of people working with its affiliated agents. Around a third of prospective buyers are connected with agents referred by Zillow, up from 27% last quarter, according to the letter. Zillow has a goal of upping that to 75%.

Jane Winn, a professor in the University of Washington’s law school specializing in commerce law, said Zillow’s referral practices are not uncommon in other types of businesses. But the fact that real estate is a highly regulated industry — partially due to the level of money real estate companies stand to profit from consumers — makes the legality of such practices more complicated.

“This whole area of how the real estate agents are compensated is complex and murky,” she said. “What these lawsuits might be arguing is that these transactions are so significant to consumers that you have to have a very high level of disclosure.”

Zillow’s business practices have been the subject of a string of lawsuits this year.

In September, another homebuyer who used a Zillow agent filed a lawsuit, claiming the company illegally tricks homebuyers into working with its agents and takes a chunk of their commission. If the buyer’s agent is part of Zillow’s Flex program, Zillow receives up to 40% of the agent’s commission — a transaction not disclosed to homebuyers.

The latest lawsuit also isn’t the first time Zillow has fallen into hot water for partnering agents and lenders.

In 2017, the Consumer Financial Protection Bureau investigated Zillow for allowing participating mortgage lenders to pay part of an agent’s advertising costs directly to Zillow in exchange for appearing on an agent’s listings as their preferred lender — a possible violation of the Real Estate Settlement Procedures Act. Shareholders filed a lawsuit against Zillow, claiming the company failed to notify shareholders that the practice might be illegal.

After five years of litigation, Zillow settled with the shareholders in 2023 for $15 million without admitting any wrongdoing. In the settlement, Zillow wrote that it continues to believe that its practices are lawful. The company continues to operate the partnership program.

©2025 The Seattle Times. Visit seattletimes.com. Distributed by Tribune Content Agency, LLC.