A federal class-action lawsuit filed in Seattle has pushed Zillow into its most serious legal challenge to date. Plaintiffs allege the company operated a coordinated system through its Flex referral program and Zillow Home Loans that misled consumers, inflated commissions, and violated federal racketeering and RESPA laws. The RICO claims indicate that the court will review Zillow’s behavior as an organized scheme rather than a set of isolated practices.
The lawsuit also names Las Vegas REALTORS (LVR) President George Kypreos and his brokerage GK Properties. Their inclusion ties national platform behavior to local brokerage issues and raises questions about governance, transparency, and consumer protection.
What plaintiffs allege Zillow did
The complaint describes a structure that routed consumers into systems that financially benefitted Zillow. Key allegations include:
Deceptive lead routing
Consumers who click “Contact Agent” or “Request a Tour” expect to reach the listing agent. Instead, they reach a Flex agent who pays Zillow a forty percent referral fee that is not disclosed.
Pressure to send business to Zillow Home Loans
Twelve confidential witnesses say Zillow managers delivered expectations for lender steering verbally so the instructions would never appear in writing. Agents who did not comply risked losing Flex leads.
Monitoring agent communication
Flex agents were required to use Follow Up Boss. Plaintiffs argue this gave Zillow visibility into conversations and let the company identify when agents recommended competing lenders.
Damages sought
Ten buyers across eight states seek up to twenty five thousand dollars each. Exposure could reach hundreds of millions. Hagens Berman, known for the Moehrl litigation, represents the plaintiffs.
Why Las Vegas is part of the lawsuit
GK Properties, led by LVR president George Kypreos, is one of the brokerages named as part of the alleged enterprise.
Claims centered on GK Properties
The complaint says GK Properties helped funnel buyers to Flex agents and Zillow Home Loans, exposing consumers to hidden fees and steering.
Zillow profile discrepancies
The George Kypreos Team shows more than seven thousand lifetime sales and nearly four hundred in the past year, yet several agents with “Top Agent on Zillow” badges show zero or near zero production. Plaintiffs argue this may reflect Flex participation rather than performance.
Leadership concerns
Kypreos became president after the elected leader resigned two days into his term following allegations of election irregularities. Some members also questioned whether he explored selling the MLS to a private buyer. The RICO complaint adds new scrutiny.
Kypreos and GK Properties declined to comment.
The broader issue facing traditional brokerages
The mechanics described in the lawsuit resemble long-standing practices across the brokerage landscape.
IDX lead routing often lacks transparency
Company listings go to the listing agent, but most IDX leads are routed to a company agent who pays an in-house referral fee of about twenty five percent. Consumers rarely know that the routing decision is tied to the brokerage’s internal fee structure.
Mortgage partners and consumer expectations
Many brokerages promote preferred mortgage partners on their websites. Buttons that offer prequalification or lender introductions often route consumers to a partner who pays for placement or participates in a joint venture.
These practices can be legal and RESPA compliant. The issue is clarity.
Consumers deserve to know:
- That the connection generates a fee
- That a mortgage partner is not neutral
- That alternatives exist
The Zillow lawsuit magnifies how a lack of disclosure creates legal and reputational risk.
New national momentum for transparency
Delegates of the National Association of REALTORS® (NAR) recently voted to require that referral fees be disclosed in advance by the referring broker. This policy direction reflects the growing belief that hidden referral systems erode trust and put brokerages at risk.
MLSs are already acting: the California Association of REALTORS example
Last week, the California Association of REALTORS® announced a new rule requiring referral fee disclosure.
The California Association of REALTORS® decision signals that MLSs can play a leading role in consumer transparency. Their rule requires that brokers disclose referral fees clearly and in advance when routing a lead.
Source: https://www.car.org/aboutus/mediacenter/newsreleases/2025releases/referralfeestatement.
This move aligns with national policy trends and sets a standard that other MLSs are likely to consider.
Why brokerages should self-adopt referral fee disclosures now
Brokerages do not need to wait for NAR policy implementation or MLS mandates. The simplest way to reduce liability and build trust is to self-adopt a clear referral fee disclosure policy.
Early adopters will benefit by:
- Reducing compliance exposure
- Improving consumer trust
- Aligning with emerging national standards
- Preparing for MLS and regulatory requirements already moving in this direction
A single statement at the point of lead capture can meet the spirit of the new expectations and protect the brokerage from future claims of undisclosed financial motivation.
Why employee-agent models sit in a different risk category
Redfin and Rocket Homes use employee agents and integrated mortgage structures. Their lead routing and lender introduction systems sit inside one corporate framework. Leads are not sold internally for referral fees, and mortgage introductions do not involve cross-company payments. This reduces the complexity and disclosure liability that independent-contractor brokerages face.
They are not exempt from regulation, but their structural risk is different.
Takeaways for MLSs and brokers
The Zillow lawsuit, combined with the new NAR delegate vote and CRMLS’s disclosure mandate, marks a shift toward more explicit transparency in referral systems. MLSs and brokerages can demonstrate leadership by adopting policies that plainly explain how leads are routed and how partners are selected.
WAV Group will continue tracking developments and advising clients as the industry enters a more transparent era of lead management and consumer communication.
