Here’s a deep dive for brokers, MLSs, vendors and policy workers in the real estate ecosystem. What Zillow’s new lawsuit may change, what you should watch, and what WAV Group believes the industry must do. A shout out to South Carolina REALTORS® and their real estate commissioners for wrangling on this topic with me. I am surprised that this case was not filed in South Carolina where buyer agency agreements and business practices have been activated for years.
What’s going on
Law firms Hagens Berman and Cohen Milstein (who helped bring Moehrl) have filed a draft complaint in U.S. District Court, Western District of Washington alleging that Zillow’s Flex referral program inflates homebuyer costs.
Key claims:
- Zillow charges Flex agents up to 40% of their commission for successful sales.
- Buyers and sellers allegedly aren’t told about the referral/fee structure when they use a Zillow-Flex agent.
- Buyers clicking “Contact Agent” on Zillow may believe they’re reaching the listing agent, but are routed to a Zillow-affiliated buyer’s agent.
- Zillow’s Listing Access Standards are also under fire: sellers are required to comply within tight timelines or risk being removed or penalized, reducing agent discretion.
- The complaint seeks class status for all U.S. buyers in the past four years via Zillow referrals, invoking Washington consumer protection laws, the Real Estate Settlement Procedures Act (RESPA), and antitrust theory.
Andrea V. Brambila’s reporting provides the foundational coverage. See “Moehrl law firms target Zillow in new class-action lawsuit” in Real Estate News.
Why this is a big deal for paper brokers
“Paper broker”: an entity licensed as a broker or agent whose primary function is to generate and refer consumer leads, rather than to provide direct representation in real estate transactions.
Zillow Flex is a prominent example but there are many others and some operate within full service brokerages. Many large firms, “Teamerages”, and teams run their entire business in partnership with paper brokers.
Curating clients from the internet (online leads), nurturing those clients (buyers typically take over 360 days of nurturing from lead to close), counseling homebuyers on the marketplace dynamics and educating them about loan options is a big part of the real estate business in the digital economy. Zillow is a leader in that part of real estate. Consumers vote with web traffic and that is where Zillow meets them eye–to-screen. It’s hard work to nurture the consumer into a place where they are ready to meet with a Realtor.
But here is my observation: the Zillow client does not know they are a client; the lawyers are going to try and prove that Zillow may not disclose the brokerage-client relationship well enough for consumers to understand.
I do not believe that they can prove that Zillow is not working as hard as a real estate brokerage, or delivering value to web visitors. They are. I am no expert on procuring cause, but I understand it to be a clear disclosure of agency that buyers must pay for. Does the buyer know that Zillow is representing them as agents in these conversations and digital transactions?
Does the Zillow brokerage client know that Zillow is getting paid? And do they know the amount that they are getting paid from them? Or – more clearly – that they get a referral fee from that real estate agent they connect them with and have every right to negotiate that rate with the agent receiving the referral? Does the Zillow brokerage client know that they can negotiate those rates with Zillow?
The lawsuit raises serious structural concerns:
- Negotiability and transparency: If referral fees are fixed (or modeled without room for negotiation) and not disclosed, consumers cannot meaningfully choose alternatives.
- Steering effects: Agents may feel pressure to accept Zillow referrals, maintain platform relationships, and preserve commission splits, possibly to the detriment of buyer advocacy. Remember too – I think that the Zillow agent must introduce their client to Zillow Mortgage.
- Cost impacts: Plaintiffs argue Flex’s referral fees force sellers to maintain high gross commission rates; since buyer agents net less after the referral, they may push for higher list prices to preserve their compensation. I wonder if Rayse will be providing evidence in this case as the leading buyer agency tool in real estate. They can definitely show the differences between trades with referral fees and trades without.
- Platform dominance and policy leverage: Zillow’s volume (alleged ~66% share of U.S. real-estate-search audience) and its Listing Access Standards may allow it to set terms that squeeze out alternatives or impose costs on participants (agents, sellers) who don’t conform.
What this signals for WAV Group and stakeholders
| Stakeholder | Implications |
| MLS/orgs/associations | Need to revisit rules about referral disclosures, lead provenance, listing policy controls with your anti-trust attorneys and commissioners. You may also have to advise members on risk if they participate in referral programs with non-transparent fees. |
| Brokers / teams | Your intake, presentations, buyer-agent contracts must speak clearly about how referrals work, fees, who gets paid. Monitor portals and advertise direct paths. Be upfront and transparent about the economic arrangement with referrals. |
| Consumers | Increasing awareness and pressure forthcoming. Demand for transparency is likely to grow; some may refuse to work via referral programs without full fee disclosure. |
| Regulators / legislators | Likely to push for clearer RESPA guidance, consumer protection laws, possibly enforceable disclosures at first contact. Also antitrust oversight of platform listing rules. |
What WAV Group recommends
- Push for first-contact fee disclosure
Brokers and portal partners should require that when consumers click “Contact Agent,” a short notice appears: who you’re contacting, whether there’s a referral or platform fee, and how large a range or percentage might be. - Lead provenance documentation
Create standard forms or clauses capturing where the lead came from, whether the agent is part of a referral contract, and who pays what. This helps for compliance, audit, and consumer trust. - Audit portal “Contact Agent” flows
Mystery-shop as a consumer would: where does “Contact Agent” really lead? Is it clear who the person is, what their relationship is to Zillow (or equivalent)? Was the Zillow Agent licensed in your state? What fees are disclosed, if any? - MLS/association policy work
Ensure MLS rules do not force listing agents into restrictive timing rules that disadvantage them or that allow portals to demand exclusivity via listing access. Align policies to ensure seller and agent choice. Whenever you force all competitors in a marketplace to do anything related to how they represent the consumer, you risk anti-trust. Don’t force anything, make volunteering to participate an honored custom that makes the market work better than any other nation in the world. - Consumer education
Transparently explain representation options, fee negotiation, and the drawbacks of unseen referral fees. Perhaps a WAV Group consumer guide: “How commission and referrals work: what you should ask your agent or portal.”
What to watch next
- Whether the lawsuit is certified as a class covering all U.S. buyers via Zillow referrals in the last four years.
- Any judicial findings about what “disclosure” means: what level, when, how.
- Outcome of this in Washington and whether other state consumer protection or antitrust laws get involved.
- How Zillow (and other portals) respond — policy changes, disclosures, design changes at the portal interface, modifications to Listing Access Standards.
- Whether similar suits emerge (or pending ones expand) against other paper broker / referral-based models.
WAV Group sees this lawsuit as a likely pivot point. The combination of scale, opaque referral structures, and platform listing policies makes this more than just another commission lawsuit. If the allegations hold, the industry will either need to raise its transparency, shift fee practices, or face regulatory and litigation risk. Agents, brokers, MLSs, and portals should assume change is coming and plan accordingly.
Primary Sources
Here are the source URLs I found relevant to the Zillow / Compass / Flex referral topic:
- “Moehrl law firms target Zillow in new class-action lawsuit” — Andrea V. Brambila, Real Estate News, Sept. 19, 2025
https://www.realestatenews.com/2025/09/19/moehrl-law-firms-target-zillow-in-new-class-action-lawsuit - “The fight over real estate listings heats up as Compass targets ‘Zillow ban’ in new lawsuit” — Business Insider, June 23, 2025
- “Compass files lawsuit against Zillow for allegedly stifling competition for home listings” — Reuters, June 23, 2025
- “Zillow is fighting back against a push to make real estate listings more exclusive” — Business Insider, April 11, 2025
- “Secret listing? Banned? Why Zillow isn’t showing you the whole market.” — Washington Post, June 25, 2025
