Zillow and Trulia… Don’t Rely on Them for Your Research

Our company motto is “Solid analysis identifies great opportunities.”  But analysis is only as accurate and reliable as the data used to perform it.  I frequently hear buyers and sellers claim that they have “done their homework” by checking listings and sales on the large national realty search engines like Zillow and Trulia.  These sites are easily accessible, they’re free to use, and they may even provide a quick automated estimate of property value—something Zillow calls its “Zestimate.”  BEWARE.

How do you think Zillow and Trulia and the other “free” aggregators of real estate listing information make money?  Did you ever wonder how they can offer their information free to the public?  Their primary source of income is by selling home buyer and seller information—commonly called “leads”—to real estate agents.  Agents pay large monthly sums to have these national internet firms channel leads for certain zip codes to them.  The “top agents” you see recommended on these sites may be very good, but they are paying to appear there.  (The exception to this is where a listing you see is actually listed in the local MLS system by that particular agent.  In that case, these sites usually place that agent’s contact information on their site, along with a couple of other “recommended” agents or “top performing” agents.)

The big problem with sites like Zillow and Trulia is their information is generally NOT COMPLETE and it is often NOT UP TO DATE.  It is not complete because many MLS systems (the Charlotte Metropolitan Listing System among them) which create the original database of real estate sales information in a given area refuse to allow their listing data to automatically be fed to these national sites.  The listing agent must specifically request this information be fed by their MLS system to these sites, and many agents—myself included—refuse to do this.  That means there are many more properties on the market at any given time than you can find on Zillow and Trulia.  It also means that the data you use when you do your research using these sites is incomplete and, therefore, inaccurate.

Why to local brokers choose not to allow their listings to go out to Zillow and Trulia?  After all, you would expect that more national exposure could only serve to promote a listing.  One of the primary reasons brokers refuse to allow their listings to go out to these large national aggregators of listing data is the inaccuracy of their computer generated estimates of value—those “Zestimates.”  Zillow will not disclose how they arrive at these estimates.  Many brokers have seen Zestimates for their listings that they know are wildly inaccurate, and many have attempted to induce Zillow to change them to reflect the true data.  Zillow typically refuses; or if any change is made, it is made so slowly that the damage has already been done. 

Can you imagine doing the research to price a home for sale, arriving at a listing price of $325,000 after thorough analysis, and then seeing your property listed on Zillow with a Zestimate of only $285,000?  Or, alternatively, would you want to be the homebuyer who sees a home listed on Zillow for $275,000 with a Zestimate of $310,000, only to discover after a more complete analysis by your agent that the market value of the home is closer to $265,000?  Since the purchase and sale of a home is usually the largest single investment an individual makes, mistakes such as those above can have a huge impact on an individual’s financial health.  Of course, the same consideration applies to investors.

So beware of the large national real estate search engines like Zillow and Trulia.  Yes; their information is free to the public, but it is often worth about what you pay for it.  It is incomplete and often outdated.  Yes; they do make things easy by providing tools like automated valuation models.  But they do not reveal how they calculate those valuations, and their valuations are frequently wildly inaccurate.  Just as solid analysis can identify great opportunities, incomplete, incorrect or outdated analysis can lead to huge mistakes.