How does Zillow calculate housing values?

Very Badly. Its about 100k off on its estimate on the house Im living in. Also says we have a fire place. Lived here almost 30 years. Never had a fireplace. Says we have detached garage. We have no garage. Says we have 4 bedrooms. We do (but no way they could know that) so they are including the den as a bedroom. Says we have 1 1/2 baths. We have 1 and 2 1/2 baths.

In one word it's, "MAGIC".

Honestly I don't know the details of their algorithm, but I can guarantee it is based partially around the following 2 things, recent sales and tax assessments.

More important is how accurate are these Z'estimates? In my experience they have been pretty much dead on except in a few instances with outliers and houses with functional obsolescence.

For instance, I sold my first house  a little over a year ago. 

Zestimate: $203k

Listed: $220K

Sold for: $205K

Hope this helps!

@Benjamin Timmins  brings up another good point. Sometimes the listings are missing or in his case adding things that the house has or doesn't have. Since the system is based off of house stats this will obviously throw off the valuation...

Cheers!

@Gualter Amarelo  You need to take other things into account. Like properties being grandfathered from current tax rates. Mine is. Everyone around me is paying 3k or more in property taxes. I pay 1400. Got to love antiquated laws.