Takeaways from the Zillow class-action suit

On Behalf of | Jul 9, 2019 | Real Estate

A real estate transaction in Florida may become a tangled affair when a property is advertised online through a service such as Zillow. As reported by the Herald Tribune, a class-action lawsuit alleges Zillow designed its “co-marketing program” as a way to hide a violation of the Real Estate Settlement Procedures Act. When embarking upon a real estate sale or purchase, accurate information and transparency is an important matter, especially when a third party is facilitating the sale.

Zillow is a popular online real estate listing company known for its “Zestimate” tool, which is a computerized property appraisal system. Users can enter the address of any U.S. property into the Zestimate tool and receive a general idea of how much a home might currently sell for. After a class-action lawsuit was filed on behalf of investors accusing Zillow of securities fraud, the online service found itself confronted with a complaint alleging that the company generates income through deceptive means.

Whistleblowers divulged how real estate agents were able to successfully make use of Zillow’s online listing services by purchasing premium ad space on its web pages. The ads can cost up to several thousands of dollars per month and allow a realtor to display his or her home listings on the best spots throughout the website. A legal filing with the Securities Exchange Commission showed that Zillow brought in roughly $900 million in ad revenue from real estate agents purchasing ads in 2018. As alleged in the complaint, however, the expensive premium ad spaces were paid for in part by mortgage lenders.

By paying up to 90% of a realtor’s ad space, the complaint alleges that mortgage lenders were able to receive leads from the real estate agents who advertised their listed properties on Zillow. Referring business to mortgage lenders who pay realtors a commission or fee is a violation of federal anti-kickback laws.