Really it's only inaccurate because the price of housing isn't static and certainly isn't objective. Zillow works based on how similar houses near yours have sold, which could be low because the seller wasn't driving a hard price and the buyer was a good negotiator. It could be higher because the seller was firm on the price and the buyer didn't know any better. Not to mention, Zillow doesn't know if you recently renovated your kitchen. They don't know if you have unrepaired water damage. It's all a guess.
That being said, I wouldn't say 10% is a super high overestimation. On my street are two identical houses and one sold for $150k while the other sold for $180k, even though they're literally identical other than the color of the siding.
The number that really matters is the appraised value. Zillow had my house at $110k when I bought it and the buyers were asking $140k. It was a surprise when the appraisal came back at $145k. If Zillow was right, the bank would never have given a loan for $30k over the value of the house. But there was no way for Zillow to know the amount of work the previous owners put into the interior of the house.
> Really it's only inaccurate because the price of housing isn't static and certainly isn't objective.
If it was static, an estimation tool wouldn't be useful.
And it's not just "the price of housing isn't static and certainly isn't objective." After all, Redfin faces exactly the same difficulties. Somehow Redfin uses more or less the same data and comes up with estimates that are much closer to the prices houses actually sell for (in this area).
The median house sold in my area cost ~$660k last year (zip code 98117). 10% overestimation is a (much) larger absolute error than $15-30k.
And there is plenty of sale volume in this area of similar houses -- the average/median of which are far below Zillow's estimates.
I wouldn't say appraised value is what matters. What matters at the end of the day is what buyers are willing and able to pay. Appraised value is both a factor in that as well as a result of that.
That being said, I wouldn't say 10% is a super high overestimation. On my street are two identical houses and one sold for $150k while the other sold for $180k, even though they're literally identical other than the color of the siding.
The number that really matters is the appraised value. Zillow had my house at $110k when I bought it and the buyers were asking $140k. It was a surprise when the appraisal came back at $145k. If Zillow was right, the bank would never have given a loan for $30k over the value of the house. But there was no way for Zillow to know the amount of work the previous owners put into the interior of the house.