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So just how reliable are these for determining a house's value? On their website they give stats for how close they come to the averages sales prices in an area but in the community I live in the large number of foreclosure sales seems to have depressed the sales prices well below that of the Zestimates. Apparently Zillow does not factor short sales and foreclose sales into their equations for the Zestimate. Right now the average sale price in my development is about $100K below the Zestimates. How should a homeowner with a well maintained and recently upgraded houses price theirs relative to the foreclosure/short sale prices and the Zillow estimate?
Zillow is a toy. It should not be used to factor your selling price. The value of its little maps and such is limited, but it is pretty and makes for good eye candy. It is remarkably easy to manipulate the 'zestimates" of fairly large number of properties through tools that zillow has on their site.
Clear?
OK, as to pricing a "TOP NOTCH" property in area with many short sales and foreclosures you have NO REAL CHOICE other than to use the 'distressed sales' as comps. The lenders and their appraisers are doing it, so your buyers will. No way around it.
The smart thing to do is to get in touch with SEVERAL real estate agents who REALLY know the area. I think sometimes that includes the listing agents of the places the most recently sold, but definately should also include the BUYERS agents that represented that side of recent sales, as odds are good that they will know FIRST HAND just how "un fixed up" the distressed homes were.
With info from the freshest closed deals you can make SOME minor adjustments, but if you want sell in a reasonable amount of time you are really going to have to stick close to the comps -- people are NOT going to risk overpaying!
Take solace in knowing that homes that are WELL MAINTAINED and have current upgrades will also sell more QUICKLY than those do not. Further, you can pick and choose your buyer much more than a distressed seller, and you can dictate much more rigid terms -- TIME IS MONEY. Short sales and foreclosures are painfully slow and buyers that come to you ought to be informed that if they REALLY WANT A HOUSE TO LIVE IN and a deal that can be done in normal time frame a NON_DISTRESSED SELLER is the ONLY SANE CHOICE!
I don't find Zillow reliable--at least in my neighborhood. To give you an idea, I've attached a GIF of a Zillow apartment listing. (I deliberately captured a GIF because I know prices change.) At $72 million, Denver must rank up there with NYC, Tokyo, and London for expensive housing.
It drives me nuts to no end! My house was new construction. Closed on it in Feb '08. It appeared on zillow about 2 months ago with ridiculously high zestimate. I think this is a result of a more expensive neighborhood being in very close proximity. They've been dropping the value ever since.
I don't argue the zestimate. As a matter of fact, it's still high. However, in order to correct their own mistake, they show the tanking of the value over these 2 months as a trend and somebody looking for trends would think the neighborhood must be going downhill! The state is up, the county is up, the city is up, the zip code is up... it just so happens that my house is 10% down over 2 months simply because zillow doesn't know what the heck they're doing!
What happened to my previous house is even more outrageous! It was placed at some point in a different zip code! After that they decided a SFR all of a sudden became a "building with 6 units"! Luckily, that one is no longer my problem.
The actual estimates are not reliable, as they don't take nearly enough into account (condition, interior, etc.)--just square footage, acreage, location.
That said, the aggregate trending data (increases/decreases by zip code/city/county/state) seem more reliable, perhaps because they are at a higher level. For example, Zillow does seem to get right which areas are increasing/decreasing quickly or slowly, but the estimate numbers often seem off.
Folks, please be careful when using Zestimate or any other computer generated valuation system. These programs can only use raw numbers and that is OK to get a general idea of what your property is worth. They are fun and can sometimes give you a ballpark figure of your property's value.
These programs have never been to your neighborhood or have seen your property - is it on a busy street, don't take into account whether your property is updated or not, and so many other factors that need to be taken into consideration when pricing a property. Real estate is a local business and pricing isn't totally black and white. If you're going to put your property on the market for sale, you need a professionals analysis of your property; either by hiring an appraiser or an experienced real estate agent.
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My house was new construction. Closed on it in Feb '08. It appeared on zillow about 2 months ago with ridiculously high zestimate. I think this is a result of a more expensive neighborhood being in very close proximity. They've been dropping the value ever since. 
