Love it or hate it, real estate information website Zillow has revolutionized the way buyers look at the value of new and existing homes. It’s simple: Users type in an address and get the home’s square footage, lot size, beds and baths, tax information, and the so-called Zestimate, which they can use to challenge the asking price for new or existing homes that are on the market.

Although these computer-formulated estimates of a home’s value based on its physical attributes, tax information, and previous sale records are not appraisals, many consumers view them that way. Just as they’ve gotten used to talking about cost per square foot, home buyers feel entitled to have estimates about home values at their fingertips “Home buyers do put a lot of weight into a Zestimate,” notes Mike Kalis, CEO of, a Detroit-based brokerage that specializes in new construction sales. “It is extremely common to hear a customer say ‘… but Zillow says this home is worth x.’”

Albany, N.Y. real estate agent Wayne Richard says online estimates are good for providing a starting point of a value but they don’t preclude firsthand evaluation by a real estate professional, as they usually do not take into account value-adds that also are overlooked in pricing out square footage. These include factors like good school districts, the surrounding neighborhood, or stellar views.

“The home’s condition and subtleties of location and neighborhood need to be weighed against other sold and pending comparable homes,” he says. “The Zillow algorithm is good, but it’s not going to have the experience of how buyers will react to orange shag carpet versus the new porcelain tile just installed in the house across the street.”

Of course, the neighboring community is an important consideration as well, Richard says. “Zillow may not know of the new construction going on at the micro-local level that may influence jobs, services, or traffic that can impact the value of a home,” he says.

In fact, Zestimates that are either too high or too low can kill a sale and have spurred lawsuits against Zillow by claimants who say it misrepresented the value of their home. Zillow claims that its estimates are within 20% of a home’s final sale price 85.8% of the time, which means that they could be 20% higher or lower than a home’s actual value.

Houston-area Realtor Bill Baldwin says it is unrealistic for Zillow to accurately value a home without seeing the inside of it and knowing the property’s condition. A Zestimate can never replace the calculations of a seasoned real estate professional, Baldwin says, noting that he needs “to know the sold property conditions, the actual location factors, current inventory, and the current market conditions in order to provide the most accurate value for any particular property. Past sales are only part of the value proposition.”

Kalis says builders can help ensure their new homes sell for what they're worth by offering incentives, not discounts, “so the next sales come in higher and higher, continually driving up the automatic models.”

He has found that Zillow’s analysis is less effective in rural, waterfront, high end and extreme lower end homes but highly effective in newer production build neighborhoods. But Oklahoma ReMax agent Jennifer Fields has had the opposite experience. She says that new construction Homes on Zillow are the least accurate. “There is no way of knowing what amenities are placed in the home along with the cost of construction,” she says.

Instead, she tells her clients who are buying in a new community to look to the builder’s construction loan appraisal for comparable sales leading to the value. “That is a great tool that builders use to help determine the price point of new subdivisions and are most likely the same comparable sales that the first home to close in that area will see on their appraisal,” she says.