I'm looking for a better understanding or strategy with regards to the 'blue dots' ('Potential Listings') on Zillow searches.
Oftentimes they indicate pre-foreclosure properties, but they aren't yet available on the market.
Is there any viable strategy or information you can utilize through these blue dots or are they largely meaningless when it comes to finding potential properties, etc?
Those can be foreclosures, preforeclosures, or 'make me move'.
The latter of the 3 is someone posting a high price on their own home; they'd move if they get that price. There's no value there, since no one is going to low ball their own home price.
The foreclosures them selves will likely be for sale on the courthouse steps if the process gets that far. In my area, there's no deals there. The banks price them too high to make it worth while.
The preforeclosures are where the deals can be had. You should do some digging on preforeclosure strategies. I'd wager the Zillow ones are not up to date. Once they're on Zillow, thousands of people can see them; any actual deals to be had would be scooped up fast in most areas.
If you're interested in that route, I'd recommend doing some digging on your county's web site, see if there's a way you can search legal notices, lis pendens to be specific. They may not be called lis pendens in your area, but there will be something equivalent. In my county you can search them online via a 3rd party web site. It costs $6.95 per search. You'll get them way before they end up on Zillow. From there you can look up the property (either the address will be on the notice, or the parcel number will be). You may have to take the parcel number to the county's GIS site, to look up the property in order to find the address. The owner's name will also be on the notice. From there you can send them letters in the mail, or postcards; or even look up their phone number for a call, or send a Facebook message (if you think that will work for you). If they're receptive, you may be able to work something out to buy their home, take over their mortgage, or something else.
That's a typical preforeclosure strategy, and you'll be ahead of the ball for anyone trying to do it through Zillow. Anyone seriously pursuing this strategy would definitely not be using Zillow.