I used to work for Z, and I can confirm that the Zestimate is just that: an estimate. It doesn't know things like whether you did renovations or whether the house next door caught on fire and burned down and things like that. If something about your particular house changed in the last few years, the Zestimate is likely to be way off. That said, it's fairly good as far as comps go, and if you have an average house in the hood, the Zestimate is gonna be pretty close.

Regarding the rule of thumb you mentioned, my wife and I have been looking for a house in the Bay Area, and we've determined that the listing price is just a completely made up number. We made an offer on a house that was 100K over asking price, and the sellers countered with 40K on top of that (so 140K over asking). I was like... what? You listed for X, we offered X+100K, you don't get to counter that. lol

We obviously didn't get the house, and they wound up selling for 175K over asking price (+~25%). We've made several other offers, and sometimes the house goes for 50K over asking and sometimes it goes for 250K over asking. It just seems to be totally random. It's absurd. Instead, we actually rely a lot on the Zestimate and Redfin's estimate to figure out what the "real" value of the house is. Z and R tend to be roughly in the right ballpark for the Bay Area.

> I was like... what? You listed for X, we offered X+100K, you don't get to counter that

Apparently they do, because...

>they wound up selling for 175K over asking price

And, as for this:

>Instead, we actually rely a lot on the Zestimate and Redfin's estimate to figure out what the "real" value of the house is

Let me give you a lesson from econ 101 - the 'real' value of something is whatever someone else is willing to pay for it. If multiple people are willing to pay more than Zillow or Redfin estimate, then the 'real' value is higher.