What is Zestimate and what does is mean?

[Sonal Kalia]

If the house is damaged is the estimate on Zillow given according to its condition?

I told my investor that the house is $84,000. We had a GC check it out and said rehab will cost ~$20,000. 

I used the public records to find comps and ARV is estimated to be ~$200,000.

Investor replied that "Zestimate (on Zillow) says $80,000-$112,000. So how can you get an ARV of $200,000".

What am I doing wrong? What is Zestimate? If the picture on Zillow shows a damaged house, is the estimate according to the condition?

[Charlie MacPherson]

@Sonal Kalia Zillow's "Zestimate" is a running joke in the industry.  They are so bad that I wouldn't even use them to get in the ballpark.

They don't get direct MLS feeds in all markets, so they scrape date from wherever they find it.

Here's our old house - we sold it for $481,250 in February, 2017. https://www.zillow.com/homes/3...

They give a Zestimate range of $527,000 - $602,000 and state that the home's value has increased by $4,510 (0.8%) in the last 30 days. 

Both of those claims are laughable.  There's a $75,000 range from lowest to highest price.  And no, that home has not gone up by almost 1% in 30 days.  Plymouth County, Mass has been rising at about 6% per year.

One source of their inaccuracy is that Zillow has no idea of the interior condition.  They can't tell if it was a full gut renovation built to the highest standards, a "lipstick on a pig" where the builder did schlock work or a home that hasn't been updated since 1945.  The same goes for Realtor.com, Redfin or anyone else who uses automated systems for price estimates.

Another real life example.  I recently sold my home in Plymouth, Mass as we relocated to Maine.  I saw an ad from Homelite and responded to it.  They gave me a selling price estimate of $282,000 - $304,000.  I actually sold it for $525,000.

There is no substitute for real comps and I don't see one coming anytime soon.