Zillow Zestimate Accuracy

On at least one occasion I've had an experienced agent mock me for giving any credence to Zillow Zestimates surrounding a home. In this article, I wanted to set the record straight about why I feel it's a good idea for me to point buyers to area Zestimates prior to seeing a home where the surrounding Zestimates were substantially lower than the list price of the home. I'll also be providing some other information in the process.
How can Zillow Zestimates be Beneficial for Buyers?
Especially when numerous elements enhancing Zillow Zestimate accuracy are present, a Zestimate can give a buyer an idea about if a home is priced below value, at value, or above value. While the margin of error is higher on that front, they're even more beneficial when you're looking at the neighborhood of a potential property and considering the value of properties in the area.
Progression:
If you see a property listed far below the neighborhood properties' Zestimates, even if the home may need some work, it's possible that it will be worth the repairs/improvements (though it could even be a "tear down, so that's not always the case). When I bought my first home, this scenario was precisely the case. I bought a small home in a location of larger homes of higher value despite the work needed at the home because of the value I could get after repairs & the fact that I couldn't do much about the neighborhood, but I could certainly improve the condition of the house. It was the single best financial investment I've ever made.
Regression:
Conversely, if you see a property listed far above the neighborhood Zestimates, keep in mind that regression has a negative impact on value. I recall the disappointment of a seller who sold a home with me for far above what any property nearby had sold for, where the buyer was willing to pay the asking price, but the appraiser knew better and even after a value dispute where the appraiser came up from their initial value, it sold for less than what you would think a property like that would sell for. If the same home had been built in a neighborhood just a mile and a half way, it would have had no problem appraising, but the initial cost would have also been higher due to a higher cost of the land. Likewise, if you're considering an addition on your home, it's much more cost-effective if your total square footage will not be the most of any home around you or close to it.
How can Zillow Zestimates be Beneficial for Sellers?
Zillow Zestimates are most beneficial for sellers when there are numerous factors increasing their accuracy such as in the list below, especially those most important factors. With many accuracy enhancing elements in place especially, it can give an owner a ballpark idea of what a home is worth, which can be beneficial for something like PMI removal after a property has achieved >20% equity after <20% was put down initially.
Zestimates can also be helpful when a seller is considering selling prior to getting an assessment from a real estate agent. That said, if a seller lists a home for sale for the Zestimate without having a professional opinion on value, they could be leaving 10's of thousands of dollars on the table if not hundreds of thousands of dollars. In addition, they can be listing a property far above the actual value, with a long market time having a negative impact on eventual sales price, all other factors the same. In addition, for sale by owner homes have a significantly lower median sales price than listings by agents. Not getting a professional opinion on value leading to a long time on the market is 1 of many reasons why.
Accuracy Basics
Zillow Zestimate accuracy is much stronger for on-market properties (especially when listed by an agent that provided a comparative market analysis prior to listing & that is a standard agent rather than a limited service agent) than off-market properties, especially when the on-market property has typical (no more, no less) marketing for that price range home.
On Market Statistics:


Image courtesy Zillow Last Updated April 27, 2023
Off-Market Statistics:


Image courtesy Zillow Last Updated April 27, 2023
Where Zestimates have a hard time:
Anything that isn’t listed as a metric on Zillow. The public remarks on a property likely have no impact on a Zestimate. For Zillow, it’s all about the metrics, because Zillow is algorithm based, not based on an individual’s manual opinion. Zillow isn’t smart enough to sift through the public remarks well if at all.
Any improvements (i.e. upgrades, replacements, & repairs) performed since the last sale.
It's been a long time since the last sale.
Any significant deterioration since the last sale.
Waterfront (especially high up navigable with deep water & a dock) vs nonwaterfront
Neighborhood homes have high levels of variance in the quality of constructions & volume of upgrades
Detached + attached garage configurations. (i.e. a 4-car garage property in a community of 0-1 car garages may have a lower Zestimate than it should, especially if it last sold a long time ag