Zillow Group Inc., one of the most recognized names in online real estate, is facing a proposed class action lawsuit that accuses the company of steering homebuyers toward its own mortgage division, Zillow Home Loans, in violation of federal and state laws. The lawsuit, filed in the U.S. District Court for the Western District of Washington, claims Zillow used its powerful referral network and agent partnerships to coerce customers into using in-house lending services, limiting consumer choice and inflating mortgage costs.
The Allegations
According to the complaint, Zillow operates a sophisticated lead-distribution system that rewards real estate agents who refer homebuyers to its affiliated mortgage company. The platform allegedly prioritizes agents who meet internal quotas requiring them to direct a percentage of clients to Zillow Home Loans. Agents who fail to meet those quotas risk losing access to premium leads—potentially cutting off a major source of business.
The lead plaintiff, an Alaska homebuyer named Armstrong, claims she was misled into believing she had to obtain her mortgage through Zillow Home Loans to maintain access to her chosen agent and to ensure her purchase proceeded smoothly. The lawsuit asserts that Armstrong, like thousands of other homebuyers, was not informed that she had the right to seek financing through any lender of her choosing—an omission that may have caused her to pay higher interest rates or fees.
The case, titled Armstrong v. Zillow Group Inc. et al., alleges violations of the Real Estate Settlement Procedures Act (RESPA), which prohibits kickbacks and referral fees that can raise costs for consumers in real estate transactions. The lawsuit also claims Zillow’s actions violated Washington State’s Consumer Protection Act, arguing that the company’s practices amount to deceptive and unfair business conduct.
A Multi-Billion-Dollar Business Model Under Scrutiny
Zillow’s mortgage division, launched in 2018, has become a major part of the company’s integrated homebuying ecosystem. By 2024, Zillow Home Loans originated more than $3 billion in mortgage volume, according to data cited in the complaint. The company promotes the service as a way to simplify the homebuying process, offering pre-approval and financing directly through its platform.
However, the plaintiffs allege that the model has evolved into an illegal steering system, where Zillow’s financial incentives dictate the flow of business between agents and homebuyers. The lawsuit asserts that Zillow’s system of “affiliated business arrangements” is designed to increase loan originations through Zillow Home Loans, rather than to benefit consumers.
Under RESPA, real estate professionals are required to disclose any business relationships that might create a conflict of interest, and they are prohibited from receiving compensation for steering clients to a specific lender. The lawsuit contends that Zillow’s internal quota system effectively rewards agents for such referrals, creating the very type of arrangement the law was designed to prevent.
Broader Legal Context and Industry Implications
This is not the first time Zillow has faced scrutiny over its business practices. In September 2025, the company was hit with another lawsuit accusing it of using misleading advertising and property listings to funnel buyers toward its own network of “Premier Agents.” That earlier case similarly alleged deceptive steering tactics designed to keep users within Zillow’s ecosystem of affiliated real estate professionals.
If the latest allegations are proven true, Zillow could face significant financial and regulatory consequences. The class action seeks over $5 million in damages, along with restitution and an injunction to halt the alleged practices. Legal experts suggest that the case could also attract attention from federal regulators, including the Consumer Financial Protection Bureau (CFPB) and the Department of Housing and Urban Development (HUD), both of which oversee compliance with RESPA.
The implications reach beyond Zillow. Many online real estate platforms now integrate mortgage, title, and closing services under a single brand, raising questions about whether such “one-stop-shop” models truly benefit consumers—or whether they create conflicts of interest that limit competition and transparency in home financing.
Zillow’s Response and Next Steps
As of now, Zillow has not issued a public statement regarding the lawsuit and has not yet filed a response in court. The company has previously maintained that its integrated service model is designed to make homebuying more efficient and user-friendly, not to disadvantage consumers.
Zillow’s Premier Agent Program—through which the alleged steering occurred—connects real estate agents with prospective buyers and sellers. The system accounts for a significant portion of Zillow’s revenue. Critics argue that by tying access to leads to mortgage referrals, Zillow may be blurring the line between marketing partnerships and coercive business practices.
The plaintiffs are seeking class certification on behalf of all homebuyers in the United States who were referred to Zillow Home Loans by an affiliated agent and obtained financing through the company. If certified, the case could cover tens of thousands of consumers nationwide.
Consumer Protection and Transparency in Real Estate
The lawsuit underscores the continuing tension between technological innovation in real estate and the long-standing legal frameworks designed to protect consumers. Platforms like Zillow have transformed the homebuying process, but they also concentrate enormous power over how information—and financing—flows between buyers, agents, and lenders.
Consumer advocates say the case highlights why transparency and disclosure are crucial when companies operate across multiple sectors of a single transaction. Homebuyers, they argue, should always know when their agent or platform has a financial stake in a recommended service.
As the case moves forward, it may serve as a litmus test for how the law adapts to digital-age real estate platforms. A ruling against Zillow could spur tighter oversight of referral and lead-sharing arrangements industrywide, while a dismissal might reaffirm the legality of integrated online real estate ecosystems.
Stay updated on major legal developments shaping the business of real estate and consumer protection. Visit LawCrossing.com to explore current legal job openings in consumer finance, real estate, and class action litigation.