Why would anyone trust Zillow’s opinions over anyone else’s opinion? Everyone has access to the same historical sales data that the market actually cleared at. In fact, it is has never been easier for the average person to research historical sales information. They can filter the parameters of the house they are interested in the area they are interested and find all the previous sales data, all while sitting on the toilet, thanks to websites like Redfin and Zillow.
They can “lie” all they want, it makes no difference to what price a house sells for.
Zillow’s current value estimates are their opinion (or what they want people to think is their opinion). Regardless, it is no different than a real estate agent or a cashier at target saying they think a specific property is worth $x.
At the end of the day, a buyer and seller coming together and agreeing on a price is the only thing that matters. A seller pays as much as they do because they do not have a better option, and a buyer sells for as little as they do because they have no better option. Zillow cannot affect this.
Perception matters. Direction and rate of value increases in a neighbourhood matters. The perception of the neighbourhood affects the value of a particular property.
Zillow can affect that perception. It is making calls about entire neighbourhoods, not just one property that it has a declared interest in. It is acting as a supposed uninterested party (valuing the market overall) and an interested party (benefiting from the valuing of a particular property). That's the potential conflict of interest.
How much home buying do real estate agents engage in vs just acting as an agent, compared to Zillow (in relative terms)? I don't know, maybe it's similar...
They can “lie” all they want, it makes no difference to what price a house sells for.