Is Zillow useful for predicting property values?

Not really. Zillow along with other websites take a property address, such as yours and pull all the local sales, then average the estimate based on the local sales. Just because a house is in your neighborhood, does not make it comparable to yours. They tend to use all transactions as well, Short Sales, REO's, Trustee Sales and Standard Sales. If you look at the recent sales they use, each property has a wide sales range. I pulled my house and Zillows estimate was 406k. I have a model match behind me, same upgrades, lot size etc. but they have a pool, spa and guest house, Zillows estimate, 386k. How do they get that #? It should be worth more than mine!

As a Real Estate Agent and an Appraiser, I know my house is currently worth about 360k right now.

Unfortunately, I have never been able to find an internet site that accurately estimates property values. The only way to know for sure is having an appraisal done, this is the most accurate. You can also ask a local Real Estate Agent to check your value, they can come pretty close.

No, it is a toy. Ignore it.

As far as appraisers they compare all sales of property built within 5 years of the subject property. It does not matter at all if it was foreclosed or sold short, those are the sales and that is what is used.

short sales and foreclosures depress the values of all the surrounding properties - you need a qualified approved appraisal, all other methods are pure guesstimates