I can't imagine anyone involved in Real Estate hasn't heard of, or looked at, Zillow (and Trulia, and other similar sites). Whether an agent or Realtor, buyer or seller in the market, or anyone who has been online looking at or for properties. Though Zillow might not be completely useless, it isn't quite what it appears to be, and those in the business of real estate will likely and wholeheartedly agree. Why? Because we spend a lot of time explaining things to our clients contrary to what they have found, or think they have found, on Zillow. What are those? Here are a couple examples:
What do we, as real estate professionals, deal with in terms of these points above? Clients confused by either intentionally (I do believe Zillow doesn't "mind" these problems at all) or unintentionally presented information. To explain how this might happen it's important to understand why this would benefit Zillow.
ZILLOW IS A FOR PROFIT BUSINESS. And why shouldn't it be? Nothing wrong with going into business to make money - not many businesses last that don't. But how does Zillow make money? A few ways, but a couple of them give incentive to pull in consumers by any means necessary. Zillow pulls from public information and from Multiple Listing Systems across the country and publishes their information on the web. They add some diagnostics, use some algorithms and other proprietary programs, and provide some useful information like market rents, market values of a property, tax values and tax bill information. Zillow makes money from bringing consumers to their site to view property information and to look for homes and condos. They call upon Realtors and real estate agents and brokers to sell them ad space and other means of getting in touch with these folks that come the Zillow site. The rates are quite Zillow friendly, depending on the zip code, from a few hundred per month (per zip code), to a few thousand per month. And each zip code might have a handful of agents signed up - just check out the right-hand column on the Zillow site.
Zillow also makes money, and this is a BIG ONE, by selling consumers subscriptions to Foreclosure.com and other sites they, and others like Trulia, work with - primarily RealtyTrac. They generally let you sign up for a few days or a week or two, and then you'll pay $50 - $100 per month if you don't cancel the subcription. This, I believe, is why they are so happy to publish "pre-foreclosure" listings on thier site and present them as if the consumer could actually, potentially, buy them. Hey, if Zillow can give you a head-start or jump start on the good deals, it's worth the monthly fee, right? Except it doesn't work that way 99% of the time. For so many reasons this is useless information. It might be OK to see a property that one might like and to keep an eye out for it, but otherwise it is something to be curiously interested in and nothing more. Why? Because the foreclosure process is a long and generally complicated process. RealtyTrac "sees" when a trustee files in court that a mortgage isn't being paid - this public record is the first step in the process. And that is when Zillow gleefully puts it on their site as a "pre-foreclosure". From that filing forward there are many ways that a homeowner might stop the process: paying the past due balance, negotiating the loan are just a couple and the main ones. Most "pre-foreclosures" do not end up going through the whole foreclosure process. Furthermore, if they do, BANKS LIST THEIR REO PROPERTIES. So knowing that the property might be going to the bank is a bit useful, the average consumer can't really do anything until it is listed on the open market. I consistenly deal with clients that see a Zillow "pre-foreclosure" and get hung up on wanting to buy it - it can cloud their vision to look for other, actually available, listings.
Why do the banks list and why won't they let folks bid early? I've spoken with several real estate attorneys I work with here in Charlotte, and they all tell me the same (and a couple are actual trustees for banks). The banks, and their representatives, won't want the hassle of dealing one-on-one with consumers, they don't want to haggle early on a single property in a pile they must deal with, and they feel (and are correct) that they will generally get better money by going to the open market than taking a single bid. There are exceptions to this, and from time-to-time the banks may package what they feel might be hard to sell properties to larger institutional investors, but these aren't homebuyers looking for one property. There also is an opportunity to bid at the courthouse if a property actually does go the full press to foreclosure, but most buyers would not be able to buy in this manner for many reasons (to see information about this, go to this link: BUYING FORECLOSURE VS. PRE-FORECLOSURE).
MISLEADING PRICING: Another problem with Zillow pre-foreclosure information is it tends to paint a partial picture. They post a "price" for the pre-foreclosure and it appears this is based on the amount of the mortgage being foreclosed and filed by the trustee. But that number, generally, means nothing. Why? Because most properties that are underwater have other "attached" issues. These can be other mortgages, liens or judgements. This is also discussed in the link above "buying foreclosure vs. pre-foreclosure", but often the mortgage or lien Zillow picks up while web-crawling is just a portion of the picture and isn't the full amount owed on the home or condo. Finally, banks will have a property appraised prior to listing it, so it will be listed at or close to market value, regardless of the amount of the note that the bank held.
PAST LISTING HISTORY: Today's market, as of this writing in March 2014, is zooming along, at least in Charlotte. Prices have been steadily creeping up for the past year or two, in some cases not creeping but steadily and heartily climbing. We slipped into a recession in 2008, hit it full bore in 2009 and the market was shaky and difficult well into 2012. Zillow posts past sales of a property - that can be helpful and interesting. We get a glimpse of what an owner has in their property, though in reality that may have no bearing on what they'll sell for. Zillow also posts listing history for recent years. I've had clients focus on this listing history and try and apply it to the market today. They can get cold feet because they feel a property was difficult to sell in the past, therefore something must be wrong with it. That or they focus on an asking price in the past and feel the property today may be either overpriced or that they could make an offer based on that past price. LET'S BE CLEAR! The market today is nothing like it was from 2009 through 2012. Many, if not most, homes or condos were tough to sell. Not because anything was "wrong" with them, but there was something wrong with the market itself. Financing was difficult, foreclosures were everywhere pulling down values, short sales were also prevalent and buyers were hesitant to buy for fear that the free-fall in values wasn't over.
HOW IS ZILLOW USEFUL? I believe the main use for a site like Zillow is the ability to look up a property quickly and get a pretty accurate snapshot about it. Square footage, photos, tax information, and if you are sitting in a neighborhood and want to know what's going on around you - it pinpoints homes for sale (ugh, and one's in "pre-foreclosure") and sales from the recent past. It's a good way to drive around neighborhoods you might be interested in and get a brief snapshot of the market. After that, go to a real estate professional and have them do the real research...before you get your hopes up for homes or condos that really aren't for sale, or won't be for the "hellova deal" that Zillow presents them to be!