Beware the Colorado MLS Listings, Zillow, Redfin, Websites and Apps
Online MLS listings, real estate websites and mobile apps like Zillow, Trulia, and Redfin and MLS websites like ColoProperty may seem like they exist to serve home buyers to find the homes they want. But this is definitely not the case. These websites are not intended to help home buyers! They are 100% marketing tools for sellers. We’ll say it again: All online property websites and mobile apps are primarily marketing tools for sellers and seller’s agents, which means using these services is definitely a “buyer beware” situation. In this guide, we reveal the many limitations and potential perils of using real estate websites and apps and share the safe ways that home buyers can use them without compromising their privacy and potentially paying too much for a new home.
What Is the Multiple Listings Service (MLS)?
The Multiple Listings Service (MLS) is a crucial, online database tool that helps real estate agents bring home buyers and sellers together. Using the MLS database, a real estate seller’s agent lists their clients’ home for sale. The Denver-Boulder real estate market has two major MLS, both with different coverage areas. Buyer’s agents (like Agents for Home Buyers) use the MLS to find homes that meet the criteria their clients care most about. This database tool is what powers all online real estate website services like Zillow. Without the MLS systems, agents and their buyer clients would be reduced to driving around looking for yard signs!
Are Real Estate Websites Like Zillow the Same Thing as the Online MLS?
No. The online Multiple Listings Services are professional databases for use by licensed real estate professionals who pay a membership fee to list homes for sale or access the database. They are not the same as publicly available MLS or online home search websites.
Online real estate websites like Zillow, Redfin, and Trulia and their mobile apps look a lot like one of the realtor MLS, but they are really nothing more than marketing systems for home sellers and seller’s agents.
Most of the professional realtor MLS systems now export some of their data on homes for sale to publicly accessible web sites like Zillow and Redfin. These sites make it possible for you to conduct a home search on your own in a manner that was unimaginable years ago. Prior to the advent of these public MLS systems, it was simply impossible for buyers to obtain a systematic list of homes for sale without working through a real estate agent.
A Brief History of the MLS
Many years ago, when a home owner hired a real estate company to sell their home, the information on that home was held privately within that company. The company’s agents worked to locate a buyer for the home. While this arrangement maximized commissions for the seller’s company, it also made it a lot harder to find buyers because keeping the house for sale information private within the company limited the number of buyers who learned about the property. It also was bad for home buyers because they were forced to visit many real estate companies to find out what homes were for sale.
Except for a few backwater areas like New York City, real estate companies figured out decades ago that buyers, sellers, and real estate companies are all better off if a list of all available properties is compiled and shared among all the real estate companies in a community. This sharing of information meant reaching a lot more buyers and it also led to the common practice of sharing commissions among real estate agents when someone else “brings the buyer.” (See more on the concept of “bringing the buyer”.)
These lists of properties for sale were initially compiled and distributed in paper form and later in the form of computer databases. Over time, the size of these Multiple Listing Services (MLS) generally grew as community-based groups of realtors merged their real estate listings into regional databases. And that’s how online real estate websites first started–as a marketing tool for real estate companies who were hired by sellers to sell their homes.
Buyer Beware!
Being able to access real estate data online can be a big convenience for home buyers if you use these websites with care, but you need to understand that this data has been put on the web not as a service to home buyers but as a marketing device for home owners and for listing agents.
That’s right: Zillow, Redfin, Trulia, and the online MLS database websites are marketing tools for home sellers and seller’s agents.
These websites are designed to help find home buyers and, perhaps, to sell homes at the highest possible price and the best terms for sellers.
In other words, these websites can raise the price you pay when you buy a home. Or make the terms of the sale less favorable to you, the buyer. See more about why searching for a home alone is risky and unnecessary in our article Can’t I just use Zillow?
Here’s an overview of what these online home search sites and apps are intended to do:
- These sites are designed to get you to want to contact the seller’s agent who is listing the property that interests you on the site. One potential consequence of contacting an agent through a real estate website is that you may lose the legal ability to have a buyer agent represent you.
- These sites are designed to collect your info so that seller’s agents can contact you later to market their services or other homes.
- These sites, when used in conjunction with other digital marketing tracking platforms, can harvest and combine information about your income, demographics, education, and other background clues that can help seller’s agents sell you homes at higher prices or through contract terms that are more favorable to the seller. Think of these websites as being even more risky than one of the 6 Most Common Real Estate Mistakes: going to open houses. (See why open houses are not the way to find a home.)
Real Estate Websites Intentionally Limit the Info They Show
Because online real estate websites are marketing tools for sellers, there is a lot of info they don’t share with buyers. These sites don’t share a lot of info that realtors can see using the professional realtor MLS:
- Properties under contract: The distinction between Active Properties and Under Contract Properties is available on the professional realtor MLS but is not always shown on real estate websites. Why? Because seller’s agents like to take backup offers in case the first contract doesn’t close. It also gives seller’s agents an opportunity to refer new buyer leads to similar homes, which gives them time to convince the buyer to work with them exclusively.
- Past Sales History and Past Listings: The full realtor MLS system offers a wealth of information on past sales and older listings of properties. That info is minimal on online real estate websites. Why? It’s because prior sales history doesn’t always tell the story that the seller’s agent wants to tell. Home buyers who are not using a buyer agent cannot always tell if a home has been relisted several times, which could be a warning sign or give them negotiating power. Seeing changes that a listing agent has made to the listing can be another valuable piece of info that buyers cannot get through these websites without a buyer agent. This info is not available on real estate websites simply because it is too valuable for the seller’s agent to release to the public.
- Data Lag for New Listings and Price Changes: The full realtor MLS system shows new listings and price changes almost immediately to professional real estate agents. It takes about 24 hours for this critical data to upload to the public real estate websites. This delay can really change the terms of sale in a dynamic real estate market like we have in the Denver-Boulder area. In some of our local markets, up to 20% of new homes are going under contract within 5 days of listing and many of the most desirable properties go under contract within 24-48 hours. Buyers need a buyer agent to help them be in the running.
- Newly Built Homes Aren’t Always Listed: Nearly all residential home builders in the Boulder and Denver metro area will pay commissions to real estate agents who bring buyers to their developments. But some builders don’t list their newly built properties on the MLS databases, which means these new homes also will not appear on real estate websites. When we are working with buyers, we routinely extend our searches beyond the MLS to make sure that we are locating all the properties that these buyers might be interested in, including websites on new home developments and our list of contacts among new home builders. (See more on what to consider when buying a new home.)
The MLS and Real Estate Sites and Apps Really Do Work. For the Seller!
These online real estate websites and apps are really effective marketing tools for seller’s agents. These services are especially helpful for seller’s agents who are trying to sell homes that are overpriced or have some deficiencies that are making them difficult to sell.
The agent listing a home for sale has a marketing or “listing” contract with the owner that typically obligates the owner to pay the agent a 4-7% commission when the home sells.
This contract will also specify that the listing agent will split that commission with any agent who brings a buyer to the home, shows it, and submits an offer that results in the sale of the property.
The seller pays the same commission whether the listing agent sells the property directly or through another agent who “brings the buyer” to the property.
From the seller’s point of view, this is a great marketing system. It provides an incentive for the listing agent to locate a buyer directly, since they keep the whole commission that way. It also encourages other agents in the area to bring their buyers to the home, since they’ll get a split of the commission if “their buyer” makes the purchase. (See more on the concept of “bringing the buyer”.)
By using the web to market homes, and particularly by making their listings available through the public versions of the MLS, listing brokers dramatically increase the chances that they can make a direct sale to a buyer and thus double their money by retaining the full commission.
This direct access to buyers becomes even more important with a home that is overpriced or that has deficiencies that are making it difficult to sell. If the listing agent can find a buyer who is not represented by a knowledgeable agent, and who doesn’t have the ability to analyze pricing data on prior home sales, the selling agent has an advantage. He is more likely to make the sale than he would be if there were another agent getting in the way by advising the buyer to offer less or to just move on and find a better property.
Safer Ways to Use Online MLS and Real Estate Websites Like Zillow and ColoProperty
- Don’t use the mobile app. Depending on their terms of service and permissions you accept during installation, mobile apps may share much more personal info about you with their services than you’d expect. Installing a mobile app is more intrusive and risky to you than using a website.
- Do not create an account! As soon as you create an account on a website or install the mobile app, you are enabling digital marketing tools to track you and build a profile about you for the seller’s agent to use. The more the seller’s agent knows about you, the more they can try to raise the price or improve the terms of sale for their client, the seller.
- Use Incognito Mode: Using private browsing that blocks all cookies and tracking is one way to use real estate websites that is unlikely to cause problems. If you log into an account using private browsing, however, you are being tracked and adding to your profile.
- Poking around just for fun: If you aren’t actually looking to buy a home, then it’s less risky to use real estate sites and apps. It can be fun to see what’s on the market, particularly if you know the seller or the home is in your neighborhood. But be aware that digital tracking has gotten so sophisticated that your activity on these sites and apps is stored for a long time–even if you are not logged in. By using these sites, you are adding to their profile of you and that may compromise your job search later.
- Dreaming: If you are just surfing around luxury estates in other countries, other states, or celebrities’ homes, the risk to you is pretty low. The closer you get to searching for the kinds of homes you might one day want to buy, the more your risk increases.
- Build a sense of the market: If you’re just using online real estate websites and online MLS to get a sense of pricing in different towns, neighborhoods, for different types of homes, or to get a sense of availability for these areas or types of home, you don’t need to worry much. However, we still recommend that you use some kind of private browsing mode.
- Never contact an agent through a real estate listings website. Remember that the agents who are shown alongside properties for sale on these websites are always seller’s agents. That means they are always legally required to work for the best interest of the seller, which is usually against your best interest as a buyer. Instead, contact seller’s agents through a buyer agent. See more on the different types of real estate agents in Colorado.
Next Steps in Buying a Home in Colorado
Contact Agents for Home Buyers! Lindsey and Danielle can help you navigate the home buying process to find a great home you will love. It’s what we have been doing as buyers agents for 25 years in Boulder County, Jefferson County, Broomfield, Larimer County, and nearby.
Step 1: Educate Yourself About the Home Buying Process
Step 2: Form Your Team of Real Estate Professionals: Mortgage Broker and Buyer Agent
Step 3: Set Realistic Goals for Your Home Search
Step 4: Beware the MLS and Online Real Estate Databases
Step 5: Begin a Focused Home Search
Step 6: Craft Your Home Purchase Offer
Step 7: Negotiate the Contract
Step 8: Colorado Real Estate Documents and Forms
Step 9: Home Loans and Financing
Resources: Home Buyer Assistance Programs