I have always been infatuated with “frequency illusion”, and believe it or not - it only received that moniker in 2005 by Arnold Zwicky a linguistics professor from Stanford. Frequency illusion is something which I believe plagues all humans on the planet. The technical definition, thanks to my friends at Wikipedia, that people may mistakenly believe that certain events or phenomena happen more often than they actually do because of inaccuracies or biases in how they process information. This can unfortunately lead to a regression effect in accuracy of frequency estimates. In other words, you buy a white Tesla Model 3 with pride and distinction, and once you drive it off the dealership lot – all you see is white Tesla Model 3’s. You take an Uber and there it is again... a white model 3, you watch Fox News or CNN and see a photo of a white model 3, with a photo of Elon Musk beside it.
Believe it or not, before the term Frequency Illusion was coined, this phenomenon was referred to as the Baader-Meinhof phenomenon, which by your natural inclination is to assume that these two psychologists from the University of Oxford named Andreas Baader and Ulrike Meinhof studied this when they were completing their PhD doctorate. Well, that’s not true, believe it or not these two people were a part of a not so nice far left militant group seeking to overthrow the West German Government. For some of you too young to remember, Germany for approximately 41 years, was divided by a physical wall into two separate countries.
So along came Terry Mullen, an online message boarder in 1994, who wrote a letter to the
St. Paul Press, and in the letter he describes how after he mentioned the name of this radical militant group he kept noticing it come up again and again. I realize by now that you are very disjointed with this read, but you must admit the origin of this everyday life phenomenon, is rooted in this one guy. I wish he would have been posting about the Roman Empire, and it would be called the Maximus Decimus Meridius phenomenon, and would explain a lot of what’s happening on Instagram and TikTok today.
Sorry It Took Three Paragraphs To Tell You My Frequency Illusion
Being in the real estate industry, and attending conferences and masterminds, I find myself seeing Zillow over and over again. Zillow has not been able to create a stronghold in Canada or anywhere else globally for that matter, but it has been a dominant force in the US real estate landscape and has now become my Roman Empire. It has infiltrated my newsfeed, my reels, and my casual conversations. I have written about the evil empire in the past, and like Darth Vader faced his biggest challenge on the second Death Star in Return of the Jedi, Zillow may or may not be facing something similar.
2025 The Year of Living Dangerously for Zillow
Earlier this year there was a quote from Zillow’s CEO Jeremy Wacksman in Geekwire, that set my frequency illusion in motion. He said, “If we were starting in 2025, and we had this clairvoyance of how this had already been working, I feel like we would have [made some policies differently]”. Well, that’s all fine and good but to me this statement is akin to what we as kids referred to as a ‘do-over’ or another way to look at it is as a back-handed apology.
2025 for Zillow has been a year of several (I stopped counting at 20) major lawsuits, federal investigations, and industry criticism focused on its business practices, antitrust conduct, referral transparency, listing restrictions, media copyright issues, and deceptive agent relationships to name a few.
Compass vs Zillow
Compass sued Zillow for banning exclusive listings, arguing this policy is anticompetitive and harms brokerages. Compass has been in an industry battle to preserve its ability to market exclusive listings which has gone against the National Association of Realtors Clear Cooperation initiative, which forces agents to put their listings on the Multiple Listing Service® within 24-48 hours. Compass has been a vocal anti-clear cooperation proponent, and has been creatively and/or legitimately trying to continue to promote its so-called private exclusives amongst its own network. In true Death Star fashion, Zillow struck back by announcing that any property listed for sale, and not be made available on their site within 24 hours would be ‘forever banned from Zillow’.
The Portal Wars are Heating Up
Commercial Real Estate portal CoStar, filed a copyright infringement suit against Zillow for illegally using over nearly 50,000 watermarked images owned by CoStar, claiming $1 Billion in damages. CoStar, who also owns Homes.com
(a head-to-head competitor of Zillow’s) and Matterport (a virtual tour provider), decided not to renew their API (application programming interface) with Zillow, and as a result all Matterport’s walk-through virtual tours were pulled from Zillow.
The Zillow Hits Just Keep On Coming
No one can smell blood in the water better than class action suit lawyers who are coming at Zillow for misleading consumers by funneling them toward agents who pay hefty referral fees, not necessarily the best fit for buyers. One class action lawsuit alleges Zillow deceived homebuyers with hidden agent fees, steering them toward Zillow affiliated agents through its Flex referral program. Furthermore, if these so called Zillow certified agents do anything to steer Zillow referred buyers away from Zillow Home Loans, then those realtors will cease to receive any more referrals. Sounds anticompetitive to me!!!
Whose Lead Is It Anyway?
Back in December of 2023, Zillow closed on its acquisition of Follow Up Boss (FUB) for an estimated $500 million. It was touted as a way ‘to simplify the business process for real estate agents, helping them increase productivity and grow their businesses.’ Two years later, Zillow has made FUB a required platform for its Premier Agent and Flex Partner Program. It does allow these realtor partners a window into the activity of the consumers on the Zillow platform, with access to AI insights on specific consumer behavior. It has been touted as a two-way integration, but what Zillow/FUB forget to tell their referral agents is that the two-way street runs to and from the agent’s own database on FUB.
In other words if an agent or team receives a lead through Zillow, then Zillow reserves the right to reassign leads under specific circumstances, particularly if the REALTOR®/team fails to meet certain performance requirements or communication standards. So of the approximately 227 million unique monthly visitors to Zillow, what are the chances that the 5 million buyers who buy and the 5 million sellers who sell in any given year in the US are not already in the Zillow database. Which according to Zillow’s conflict-resolution policy, if a lead is assigned to another agent within FUB based on their hard work and follow-up strategies, and does not already exist on Zillow, then the lead will not be reassigned.
If You Can’t Beat Your Competition Pay Them Large to Get Out of the Way
Enter the Federal Trade Commission (FTC), these are the people who just imposed (September 2025) the largest civil penalty in the agency’s history of $1 Billion, along with $1.5 Billion in consumer compensation (40 million eligible consumers) at $35.50 each. So what did this company do? Amazon did not admit wrong-doing, but agreed to pay the total of $2.5 billion for ‘allegedly’ tricking consumers into Prime subscriptions and making it difficult to cancel them. Sounds like every other streaming service. The FTC is accusing Zillow of paying the ailing Redfin (before Redfin’s sale to Rocket Mortgage) to partner (or be paid to exit) with Zillow in multifamily rental listings to the tune of $100 million, and in return Redfin agreed to stop posting rental listings for the next 9 years, and as a result Redfin let go of several hundred employees in their multifamily division. It is the FTC’s assertion that this action violated antitrust laws by suppressing consumer choice and innovation by the elimination of a Zillow competitor.
What is Fueling The Beast’s Thirst for More
The sleeping giant that is Zillow has always been a sleeping giant, so what woke them up, and what should be a wake-up call to us all? January 2025 was the alarm clock for Zillow, housing appreciation in January in the US and Canada was pretty flat. In most areas was a fraction of 1%, and made consumers and Zillow’s leadership rub their eyes in disbelief over their Zestimate numbers. At least a quarter of all listings recorded a price reduction, and YTD sales were off by 5%, when 2025 was touted as the price recovery year, it was not starting that way.
As this blogger has said on several occasions the watering hole is getting smaller, and it is beholden of us as real estate practitioners to get a greater share of the water or expand to another water source. Well, Zillow did just that and has been planning their strategy for many years, or was this their master plan all along?
Can the Real Estate Industry Strike Back or Will the Threads of Destiny Rule The Day.
Before starting Zillow, the co-founders who previously co-founded Expedia (Rich Barton and Lloyd Frink) and Hotwire.com was Spencer Rascoff’s. These earlier ventures were in the online travel industry, and without question these three tech gurus got together to not only disrupt real estate but to eliminate the people on the ground (agents and brokerages). Do you think for one minute these three musketeers didn’t utter the words “we are going to do to real estate what we did to travel…eliminate the travel agent.” Come on, ask any start-up, they all have a craving for disruption and want to eliminate the service provider.
So they soon realized that travel was something that was done frequently and the lifecycle of the transaction was very short. Where the real estate journey is longer, done much more infrequently and has a ton of moving parts. Their goal has always been direct-to-consumer like they did with travel. But they soon realized that the industry was fragmented and the supplier of product came from over a million suppliers (listing agents) so eventually, they decided to partner with them/us.
But when inventories lingered and sales volumes shrunk significantly in the US market (sound familiar), they found their realtor partners weren’t paying for positioning as they once did, and decide to go to a referral model which is like a hybrid direct to consumer model. Their direct connect model delivered consumers to high performing teams and individual agents. These referrals came with service delivery rules and punitive measures if their agent partners were found straying Zillow leads away from using Zillow’s mortgage originator. The fact that they can go into your sacred CRM and pluck away and re-assign buyer/seller leads when the real estate agent fails to close them, or if the agent successfully completes the sale, they have the pleasure of paying 40% of the commission they earned to Zillow.
It’s Time We Take Our Industry Back From The Portals Like Zillow
Having just come back from a real estate conference in Europe, it was clear by many of my conversations that the portals seem to have the power in many European markets driven by millions of consumers who are on them daily. A portal’s true super power lies in the data they have been collecting on real estate consumer buying/search behavior. We as Canadians in the real estate industry have been sheltered from the portal wars, as we own our portal Realtor.ca. However, as consumers demand a better experience than this platform delivers (and it’s going to happen) we could find ourselves in a similar situation.
It’s time we start to embrace a true network which is consumer, agent and broker friendly (and its not an MLS), designed for the needs of all stakeholders, and also be responsive at the same time. A platform which does not look at consumers and their service providers as commodities to generate revenue, but to embrace technologies and information distribution to empower all.
The dawn of this, I hope, is within our grasp.
Before it becomes too late.