A decade ago, when the real-estate bubble was reaching its peak and homeowners were giddy about the rise in home values, plugging in addresses at the new website Zillow became a national pastime.

“People ‘Zillowed’ their Christmas list. They would go and look up the home value of their boss and ex-girlfriend and ex-wife and their neighbors,” said Spencer Rascoff, Zillow’s CEO. The site was originally built around these automated valuations (or “Zestimates”)—in 2006, not a single for-sale listing was posted on the site. It now has millions of listings and agent reviews, among other features. 

Knowing the estimated value of a home was power—or at the very least, juicy gossip. That’s why it was so surprising that Rascoff sold a Seattle investment property earlier this year for $1.1 million—far less than its Zestimate of $1.7 million. This particular house, he said, was located on a major arterial street, a fact that wasn’t baked into the Zestimate...Read more