In my area, it seems to be the availability or lack there of true comps. For instance, my home (that I currently rent out) is 1350 sq. ft., 3 bd, 2 ba, 2 car attached garage, full brick, $20K kitchen remodel, new carpet, tile, etc. The homes around it are of comparable size, value, etc. However, none of the homes around it have sold in the last 6 months. The home across the street is listed at $115K and hasn't been updated since the day it was built 30+ years ago. So, Zillow uses "comps" from the other side of town (it's a small town) that are 2 bd, 2 ba, no garage, not brick, and may or may not be comparable in sq. ft. Many are also in "undesirable" neighborhoods and sell for about $35K-$70K. So, Zillow has my home appraised around $103K (the last time I looked). In reality, if I had a realtor list it, they would list it around $120K and I would probably get closer to $115K.
My DH's house is much closer to accurate, in my opinion. We live in a bigger city and houses in his area sell more often. So, the comps are better. I'd say his house is within 5% of Zillow's estimate.
