I started using Zillow just about as soon as it launched and there really should be a disclaimer along the lines of "For entertainment purposes only".
There are at least three major problems with Zillow as I see it:
1. Zillow only uses public information which is not always (read: more often times) NOT completely accurate;
2. Zillow is a COMPUTER company that relies on their COMPUTERS to aggregate information and numbers and then throws them into a "proprietary" formula, without considering the myriad other factors that make up a property's true value;
3. As a result of this potentially faulty information, owners, buyers, agents and whomever else is using the service is probably getting an inaccurate estimation of the value of the property, thus creating misconceptions and (often times) overINFLATED "Zestimates" of the property's value.
Don't get me wrong, I love Zillow and it may turn out to be a useful service as more information is gathered and analyzed. My main concern, though, is to have to convince my home owner clients and buyer clients that Zillow is more for entertainment purposes than for actually trying to determine a property's true market value. It may be a good place to start, but that's about it.
I mean how can a computer determine a value for a property that is in "Fair" condition versus one that is in "Very Good" condition? How can a computer determine a value for a property that is adjacent to a noisy and smelly restaurant? How can a computer determine a value for a property that has "Distant Ocean" views versus "Pond Views"? My point is it tends to be these 'soft' features and qualities in ADDITION to the raw numbers, that make up the true value of a property.
Maybe for commercial real estate, where values are predominately based on numbers such as price per square foot, lot sizes, etc., Zillow may come into it's own. But I remain unconvinced that Zillow will (at least in the near future) become a useful tool for residential real estate.