Zillow is a popular website that many buyers and sellers use to find residential real estate listings. Zillow generally receives its information from Multiple Listing Service (MLS) feeds or individual brokerage websites. In other words, Zillow is able to take listings posted to a centralized database and display them on their site. Hundreds of other real estate sites, like Redfin.com, Homes.com and ColdwellBankerHomes.com, do this exact same thing. Zillow’s interface is very-consumer friendly and therefore, the site is very popular with first-time homebuyers.
However, Zillow often displays incomplete data, outdated listings and can be glitchy. Plus, many consumers do not understand how Zillow truly works, and consequently do not know how to get the most out of the site. In this article, I will define the main problem some agents have with Zillow and list alternatives that may better help you, the consumer, more easily find your dream home.
Why Some Real Estate Agents Dislike Zillow
Zillow is highly contentious in the real estate field, just like HomeLight, although for different reasons. I will explain why that is through an example deal below. However, before doing so, please refresh yourself on how a typical real estate transaction takes place.
Let’s start with how Zillow makes money. Say I am a seller’s agent listing a new property, a beautiful bungalow home in Milltown for 800k. I post that listing to the MLS. MLS is the system us brokers use to look at properties. It is not a soccer league, that is a different MLS! Anyways, Zillow then pulls (or receives) the information on the bungalow (square footage, number of bedrooms, etc.) and posts the listing on their own website. In this example, any buyer looking on Zillow for single-family homes in Milltown between 750k and 1 million dollars will see the home.
Here is where the problem lies. Zillow has to make money: To do so, they created the concept of Premier Agents, agents who have paid money to appear next to seller agent’s listings. So, if you are a buyer and call an agent you found on Zillow on my Bungalow listing, you will likely work with that agent to arrange a viewing. If you ultimately buy the home, the Premier Agent recommended on Zillow’s website will get the buyers agent’s commission. The listing agent’s commission is usually equal to that of the buyer agent’s commission.
If you had come to me without representation or I practiced dual agency (representing the buyer and seller in the same transaction), I would likely have been able to keep the buyer agent’s commission. Consequently, I would have collected a commission on both sides of the transaction.
Why Zillow’s Business Model Is So Valuable
One might think, what’s wrong with the above example? After all, I did get paid as a seller’s agent. That is a fair point.
However, working as a buyer’s agent and seller’s agent on the same deal essentially doubles an agent’s commission! Even if a seller’s agent does not practice dual agency, the agent can always refer the client to a colleague (designated agency) and still collect a referral fee. Both dual agency and designated agency would net a seller’s agent more than a buyer having your own buyer’s agent would.
Consequently, because leads from Zillow are so valuable, they are very expensive. Even to have an individual agent’s name appear next to some listings in a specific ZIP Code can cost that agent thousands of dollars every month!
Just so you are aware, many MLSs across the USA are exclusive to members only, although agents can share listings with buyers (See Below). Some agents feel that their local MLS should be open to the public and have the same features as Zillow, thus cutting Zillow out. It is an interesting idea, but has not caught on nationally.
How Does Zillow Make Money?
As noted above, Zillow makes money by getting agents to advertise on their site. Agents are Zillow’s consumers and buyers and sellers are the product. In some cases, some agents are paying to appear as Premier Agents next to their own listings.
Is Zillow Free?
Zillow is free for consumers to use. It is also free for agents to edit their own listings, but as mentioned above, to get the most out of the site an agent needs to pay to appear as a Premier Agent next to their own listings. If not, their exposure on their own listings will be limited.
Are Zillow’s Home Estimates Accurate?
Zillow’s Zestimate feature estimates the value of a home. Zillow’s estimates are not appraisals. In my area, Zillow’s estimate of a home is generally pretty accurate. However, homes that have been recently renovated may differ from Zillow’s estimate significantly. Remember, Zillow relies on publicly-assessable and user-submitted data to determine the value of a home. In other words, they have not been inside of a home and can only make a best guess based on the info on hand.
In my opinion, a more accurate way to estimate the value of a home is to ask a number of local agents to prepare a seller a comparative market analysis (CMA). Reputable agents should also be familiar with other ways to determine value, such as calculating a cap rate, if the property may appeal to both investors and end-users (those hoping to live in the home). I strongly believe that these estimates will be far more realistic than those found anywhere online. Most agents are more than willing to prepare a CMA free of charge.
Will Zillow Buy My House?
Zillow is not in the real estate brokerage or house flipping business. However, in 2021, they will start their own brokerage service. It is still unclear what exactly this will look like, but starting a brokerage firm is sure to further tick-off the brokerage community. I expect Zillow’s brokerage business to be similar to that of Redfin.
What About Trulia?
Trulia is another online platform to find listings. Zillow bought it back in 2014 for 3.5 billion dollars. That should give you an idea of how lucrative the online real estate listings market is.
Personally, I have never met a buyer who admitted to using Trulia to find listings. There’s nothing wrong with it, it is just not popular in my area.
Alternative Tools to Find Listings
If you are simply curious about real estate, using third-party sites like Zillow can be a fine way to look at listings and learn about your local market. If you are more serious about buying, there are significantly better sources of listings and market information than Zillow.
I cannot overstate the importance of finding out about a potential new listing early. Doing so gives you a big advantage over other buyers. First and foremost, you gain the benefit of time.
Often when a new home hits the market, sellers wait to review offers through the weekend. This of course various by geographic area and seller’s preferences. If you are able to learn about a new listing even a day before your competition, that will give you extra time to decide whether to make an offer, and if so, determine how much to offer. A good buyer’s agent should be able to help you determine the value of the home (so you do not overpay) and the likelihood of your offer being accepted.
Additionally, some sellers are willing to sign an offer before their home goes on the market. Some sellers prefer this because a buyer who places an offer before a home goes on the market usually caters to the seller’s terms (price, move-out date, etc.). Consequently, private, or off-MLS, sales are very common in my local real estate market.
Here are three ways to find out about listings before they hit Zillow or other third-party real estate sites.
#1 Multiple Listing Service (MLS)
Your local multiple listing service (MLS) is likely member-only. Therefore, agents, brokers and other insiders in the real estate industry are members. However, many agents are more than willing to sign their contacts up to receive updates when new listings come on the market. Just like other websites, consumers can define their search by numerous parameters, such as number of bedrooms. Just ask an agent to set you up!
At least in my market, a consumer does not need to sign an exclusive buyer contract to get MLS updates. Don’t listen to any agent that tells you otherwise. Signing a potential buyer up for updates is a simple courtesy and a great form of advertising for agents (Their face may show up next to the listings).
Agents post their listings to MLS, which then makes the data available for various third-party sites like Zillow, Trulia and Redfin. By setting you up for updates directly from MLS, you are emailed new listings right when they are posted (or however often you have chosen to be emailed updates).
Plus, many MLS listings have attachments, such as lead paint forms and buyer disclosures. Additionally, some third-party sites do not pull all the data from MLS over to their site. For example, on MLS an engineering report about a crack in the foundation exterior may be uploaded to the listing, but missing on Zillow. Giving their clients access to more information is a big advantage of MLS when compared to third-party websites. If you need help finding an agent, see this article where I compare the various method of finding one.
#2 Trusted Real Estate Agents
Never be afraid to talk to anyone! Many real estate agents know of properties before they hit the market, or those off-market being quietly advertised.
Say you are looking for a 4-bedroom Victorian home in a specific neighborhood. Instead of passively waiting for your dream home to come on the market, consider reaching out to local agents with your parameters.
Be cautious when reaching out to agents directly. An off-market home may be kept off-MLS for a specific reason, possibly ominous in nature. If you intend to ask agents about off-market listings and then use a different agent to make an offer, be up-front with the former. Many agents will write you off if you play games with them: Word travels quickly throughout the brokerage community. Remember, to agents, time is money.
#3 Facebook Groups and Other Online Forums
Facebook groups contain an absolute goldmine of information. Like anything social media related, I do not expect its heyday to last very long.
Here is how to use a Facebook group to your advantage. On Facebook, find a group for the city or town you are interested in buying a home in. Such groups might be titled, “Middleton, Wisconsin homeowners,” or “Hollywood, Florida parents”. Each group should have hundreds, if not thousands, of members. Once you join a group in your particular area of interest, Facebook will recommend similar ones to join too. Start off with just posting to one group.
Once you are part of the group, simply post a little about yourself and what you are looking for. Of course, make sure you follow the group rules too. An example post might go like this,
“Hi, my name is Joe and along with my wife and two kids, we are looking to move to Tempe, AZ in the next few months. We are looking for a 3-bedroom, 1.5+ bath home. We are willing to take on some work! Also, we are happy to work with a seller agent, or directly with a homeowner. Please let us know if you know of anyone, perhaps a neighbor or co-worker, looking to sell their home.”
It is that easy. We have had many clients moving to other areas find success by making posts like the above. Of course, if you do not want to work with an agent, put that in your note. If not, you will have many agents sending you messages on why you should work with them.
Bonus: Town Hall
You would be surprised what you can learn at your city or town hall. This method assumes you live near where you are looking to buy property.
Simply go inside and talk to some employees. Your city’s inspectional service’s or town clerk’s office may have some useful information. As always, respect goes a long way when talking to public employees.
Get Out There and Find a Home!
I hope you have learned a little more about Zillow, as well as other third-party real estate listing websites. As you can see, things are changing rapidly in the real estate field.
Some buyers and sellers are often concerned about reaching out to real estate agents directly. As noted, agents need buyers and sellers, to do their jobs: They do not get paid otherwise! The vast majority of agents are more than willing to help you find a home or sell yours, or simply answer preliminary questions.
If you are concerned that you might waste an agent’s time, I assure you that in the vast majority of cases you will not. Even if you are not ready to buy or sell, never be afraid to pick up the phone to ask an agent any questions you have. Also, if you want to learn more about the real estate industry and home buying process, be sure to check out the rest of the articles on pyvt.
If you have any further questions, please do not hesitate to leave them in a comment below.