Zillow and the “Blue Dot” Pre-Foreclosure

Zillow and Pre-Foreclosures

Don’t be fooled by a sudden listing on Zillow that is incredibly low priced. First, see if it has a “blue dot” and the words “pre-foreclosure”. If so, move on. The house isn’t for sale. Zillow, like all real estate websites, acquires public data. Aside from actually listed properties (namely listings posted by a realtor on the MLS), real estate websites and apps also create Potential Listings. And, for Zillow, these are marked with a Blue Dot.

As a realtor, I can’t stand these listings. On any website or real estate app. They are a distraction for buyers and a misleading indicator for sellers. A house that is in pre-foreclosure is not an indicator of market value. One could theorize that a street, neighborhood or town with a high number of pre-foreclosures is a warning sign – but that would require doing a detailed analysis.

No, the “Blue Dot” isn’t a great deal that you just found

Regardless if you’re an investor or a retail home buyer. Blue dots don’t mean anything. The house is simply in some stage of pre-foreclosure. Sure, some investors will use this to create a direct mail list – but it’s really, really inefficient. So, what exactly does pre-foreclosure mean to a homebuyer? Nothing. No, really. Nothing. A pre-foreclosure is a public notice that the bank has issued because the owner of that home has missed “x” number of payments. And, the bank is warning others that the homeowner may not be able to fulfill their mortgage commitment. Now, what is happening behind the scenes is that the homeowner (hopefully) is negotiating with the bank to reconcile the past due payments. This can take months to resolve. All the while, that “blue dot” is there with a pre-foreclosure label on the house.

If the homeowner and the bank reconcile, the listing “disappears”. If not, and the bank decides to proceed to foreclosure, the house then enters a lengthy legal process for the bank to acquire the property as an asset. In some states, such as Connecticut, once this process is underway it rarely reverses. Meaning, because Connecticut has a Strict Judgement process the owner only has the pre-foreclosure period to reconcile and correct the back payment issue. Once in foreclosure, most homeowners simply walk away and leave the keys. But, that’s a blog for another day.

So, what to do with a pre-foreclosure listing?

Nothing. Again, as a realtor, this is a false positive. The house is not for sale. Even if it has a ‘red dot’ and a ‘foreclosure’ or ‘foreclosed’ label – it is unlikely ready to be sold. Once foreclosed, the house then goes through the bank’s process of asset management. This can take weeks or even months before the bank decides how to handle the unpaid loan. They may auction the house, list it on the market, or sell the mortgage to the third-party market who will then decide how they want to sell the house.

So again, on behalf of all realtors out there – please, (home buyers) don’t call about a “Blue Dot”, pre-foreclosure house that you saw on Zillow.

Have a question? Let me know.


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