How Accurate is Zillow’s AI Pricing for Home Sellers?

By Jason Baker

Jason Baker is the leading listing agent in the entire regional mls for residential and or total units sold, 8 years running. He is a tireless worker, and surrounds himself with the best admin and sales team in Montana...and the results speak for themselves.

Most homeowners check their Zestimate before selling. Who wouldn’t want to when it’s quick, easy, and feels official? After all, it’s powered by Zillow’s more sophisticated AI system. But even in 2025, AI pricing tools still miss important details that can impact your home’s true value.

Let me tell you a true story. I recently worked with a seller who wanted to list their property based on their Zestimate: $545,000. But after I walked through their home, it was clear to me that their home was worth way more. They had solar panels, hurricane-rated windows, and a prime corner lot! We listed it at $589,000, and three weeks later, it sold for $595,000, which is $50K more than they expected.

That kind of gap isn’t rare. AI tools are useful for a ballpark number, but they don’t see what makes your home unique. Let’s break down what Zillow’s pricing algorithm actually does, where it helps, where it misses, and what smart sellers are doing differently to get top dollar.

How Zillow’s AI really works. Zillow’s Zestimate uses an AVM (Automated Valuation Model) that pulls data from public records, tax info, recent sales, square footage, geographic trends, and some MLS data when available. It processes millions of data points to generate a value estimate for over 100 million homes, but it only sees what’s recorded.

Montana is one of six “non-disclosure” states, which means sold property data isn’t shared publicly. Appraisers and Realtors rely on similar sold properties, or “comps,” to set a starting list price and value. Sites like Zillow are not allowed access to these comps and therefore cannot reasonably or logically come up with an accurate valuation here without the most important data of all.

If you’re using this estimate to assess value or make plans, don’t give it any weight. If they don’t know what other like-kind properties are sold for, how could they know your home’s value?

Simple—they can’t. In states where Zillow can see sold data, the numbers are closer, but they still can’t account for your home’s condition, updates, or the current market activity.

Where it falls short. Zestimate can’t walk through your front door. It can’t feel the natural light, notice your upgraded flooring, or gauge the view from your backyard. It doesn’t know if your kitchen remodel happened last year or ten years ago. And in today’s fast-moving market, even a short lag in updated data can throw off the price. Zillow itself reports a 2.4% margin of error for on-market homes, and over 6.9% for off-market ones. On a $600,000 home, that’s a swing of more than $40,000.

How to use it the smart way. Think of Zestimate like a weather app. It gives you a general forecast, but you still check the sky before heading out. The same goes for pricing your home: it’s a ballpark figure, not a pricing strategy. A local expert brings in the real story by factoring in what’s selling now, what buyers are prioritizing, and how your home stacks up against the competition.

How it shapes buyer psychology. Buyers look at the Zestimate, whether it’s accurate or not. If it’s lower than your asking price, it can trigger lowball offers or raise doubts, even if your pricing is spot on. If it’s higher, it might make your list price feel inflated. Either way, it shapes perception. That’s why aligning your pricing with real-time market realities and explaining why helps manage buyer expectations from the start.

Why Zillow can’t keep up with market shifts. Markets move fast. A drop in interest rates, a new local employer, or a surge in relocation buyers can spike demand almost overnight. Zillow updates regularly, but it still relies on past data like closed sales and public records. By the time its algorithm catches up, the ideal pricing window may have already changed.

Pricing a home in 2025 can feel overwhelming with so many tools and opinions out there. But you don’t have to figure it out alone. We’re here to help you cut through the noise with real, human insight. If you’re curious about what your home could actually sell for, let’s connect. Just call or email me, and I’ll help you price your home right and create a personalized strategy to sell your home fast in today’s market. I look forward to hearing from you!