Prompted by a periodic e-mail we receive from Zillow about the "value" of our house (apparently its value has gone up $50K in 30 days -- really? in this market?), I took at look at Zillow's own statistics for how accurate their value estimates are.
In San Francisco more than 25% of properties that that sold had a selling price that was different than the Zillow estimate by more than 20%. Half of sold properties had Zillow estimates that were at least 10% different than the selling price.
In Marin county it's worse. 40% of properties that sell have Zillow estimates that are off by 20% or more.
Zillow is certainly a popular web site for home owners and would-be home owners who like playing the "I wonder what it's worth?" game and it has an appeal to those of us who are hooked on tracking stock market indexes. But as a serious valuation tool in our market, it's not at all useful. In fact it can actually get in the way of a realistic assessment of the value of a particular home but setting unrealistic expectations.
I find some disturbing parallels between the Zillow process and processes in use these days by mortgage lenders who try to create second appraisal opinions using similar tools. Ask any real estate agent with current experience and I'll bet he/she will be able to regale you with tales of deals gone bad because of a flawed appraisal process.
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