Here is my answer cut and paste from a previous thread regarding Zillow...
Zillow seems to be the new real estate magic pill for most internet-junkie, novice real estate enthusiasts. Frequently I get asked to do property CMA's (Comparative Market Analysis) by those who are thinking about listing their home for sale. My CMA process goes something like this...first I have a thorough conversation with the homeowner regarding physical condition, features, amenities, location, etc. Then I scour the MLS and tax archive data for comparable properties that are currently on the market, pending sale, and sold within the last 6 or so months that are in the same tract / neighborhood (same neighborhood is critical). I zero in on market conditions for the individual tract / neighborhood the home is in (also critical). I drive by the house. If I have not already seen the comparable properties in person (I preview and tour A LOT of property in my home areas), I drive by and if possible I tour those too. Once I have done all of these tasks, I create a detailed report for my prospective client. I narrow down a price range. This process takes a few hours. Then I present the report and price range to my client in person at their home, where I zero in on an exact suggested listing price.
"I looked up my home's value on Zillow and..." has become my least favorite phrase as of lately. Just the other day, I worked for several hours on a CMA, and presented a price range of $375k - $389k. After actually touring the home and seeing things like the master bedroom was really large for the area and type of house, that the electrical panel had been upgraded, recessed lighting in the living room, neutral decor, and new high-quality granite counters in the kitchen, I felt confident in my analysis and suggested a listing price on the high side of the range at $385k. "But Zillow says my house is worth $428k!"
Zillow.com is a site that, by using some proprietary combination of databases, algorithms, and who knows what else give a "Zestimate" of a property's value. Yep - it's the magic pill for some, and the poison pill for me. What Zillow does not take into account: remodeling, upgrades, views, landscaping, nearby schools, unique architecture, a recent death on the property, the crack house next door, smell, traffic noise, a main/busy street, funky wallpaper, barking dogs, etc.
Doing a CMA is really an art rather than a science.
I will give credit where credit is due though - Zillow does have some neat mapping features, which I will admit are pretty useful.