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

By The Living Well Group

Charlsi Kelley and Sarah Kozlik are the dynamic leadership duo behind The Living Well Group Charleston, a top-performing real estate team known for its personalized service and deep commitment to client success.

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.

We recently went under contract on a listing in a neighborhood with a wide mix of property types: condos, townhomes, larger newer builds, and smaller older homes all within the same area. Zillow’s Zestimate came in about $25,000 lower than the value we saw when analyzing the true comparable sales.

The difference came down to something an algorithm can’t capture: nuances within the neighborhood itself. Homes built by different builders, with unique floorplans and finishes, were selling at dramatically different price points, even when the square footage and bedroom count looked similar on paper.

By understanding those subtleties, we were able to position our client’s home strategically. With targeted staging, thoughtful marketing, and a few smart updates, the property’s strongest features shined.

The result? We had the home under contract in just a few days which is about one-third of the average time on market in that neighborhood. And best of all, the seller is walking away with a contract price well above what their Zestimate suggested before we got involved.

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.

If your upgrades aren’t in the system, if your neighborhood has a wide range of home styles, or if the comps it pulls don’t truly match your home, the number it gives you can be way off.

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!