How Bad Are Zillow “Zestimates”?

From time to time, Zillow rejiggers (that's a technical term) their algorithm, resulting in sudden readjustments of estimates. Given that the Zestimate itself is presented as a fairly wide range, the error margin is hardly hidden.

Also, it is important to remember that no appraiser from Zillow has actually looked at your house; the data is drawn entirely from sales data, public records, and volunteered information. So there's no way it can really account for every factor, nor does it even try. And there's a lag; the market can change faster than Zillow can. It is, at best, a rough ballpark estimate of what's going on in your neighborhood.

Zillow isn't accurate for Austin.

Using two identical homes in my neighborhood about 3 doors apart from each other, mine / neighbors.

Zillow - $387,546 / $384,326

Redfin - $417,808 / $420,737

TCAD - $368,876 / 372,802

(Recent Appraisal) $427,000 / (Recent Sale) $429,000

What's worse, is that when I contested my taxes Zillow used the TCAD numbers to lower the value of my home on their site. Uh... Zillow, you know it's in our best interest to contest our taxes, right? Has nothing really to do with the value of our homes... it's a mix of us wanting to pay less and the City / County wanting us to pay more.

I'm sure there are more scientific studies, but for my house I'd say Zillow is ~10% under-market. When I went in to contest my taxes this last year, I was told by a friendly TCAD employee that Redfin numbers were better and that I should use Redfin when trying to cite examples of comparable properties with lower taxable values.

Keep in mind most of the value depends on your realtor's ability to show the house, how well you stage your house, and the number of of interested buyers.

The standard HUD uniform residential appraisal report requires a cost to build estimate. I have never seen one without that estimate completed. However, I bought a home last month which had 2 different appraisals done on it, and neither one had any weight given to the cost to build. (Despite the fact that the appraiser claims otherwise, I can mathematically prove that there was no weight given to that method.)

As far as I can tell, Zestimate works by taking prices of recently sold nearby houses and then estimate gain over previously sold prices or the property tax estimates. If Zillow wasn't in the picture, you would likely do the same thing. This obviously would generate inaccurate estimates if house wasn't in market since many years or if nearby houses are too different or too few. Another source of inaccuracy is that they don't seem to take in account school zoning very well. So house in good school area can inflate price of nearby house which doesn't have same school.

In my experience, Zillow has played big part in house pricing. Seller in hot market will almost always set the max of Zestimate and price in their mind. That prices decreases only slowly over time if buyers don't show up. In hot market usually some sucker will show up anyway and Zestimate becomes self-fulfilling prophecy.

At some point my home was converted to a duplex, and converted back into a single family home before I bought it. I've tried multiple times to get Zillow to fix the listing but they've been "unable" to do even such a simple thing...

I suspect their data quality is pretty terrible if they're unable to do any curation, so it's no wonder the zestimates are all over the place.