Friend or Foe? Zillow and websites like it are valuable tools — but they don’t tell a full story

...What about the accuracy of value? These real estate websites are hit-and-miss. Sometimes, they’re spot-on, and other times they’re easily off by 10-20 percent or more. On a practical level, we can’t expect these sites to be accurate because they don’t know the condition of a home or whether it’s been remodeled or not. These sites don’t know if 57 cats live there (sorry, cat owners).

Regardless, sellers still tend to say, “I know Zillow isn’t perfect, but I believe my house is worth that amount.” In other words, sellers get emotionally tied to the estimate and give it real weight. It’s not just a ballpark figure: To them, it’s concrete and written in stone, and sellers may struggle to budge from the number. Likewise, buyers sometimes wrestle with offering more on a property if Zillow’s Zestimate is lower.

What does a site like Zillow say about its own accuracy? According to the company, in California its median error rate is 4 percent. That sounds pretty impressive, but this is the “median” error rate, which means Zillow is basically within 4 percent of the sales price only half the time. Does that reek of accuracy to you?