This is the key insight. Systems like Zillow's model a dozen or so big factors that are easy to collect (square footage, exact location, nearby comps, sales history, etc.) -- and then treat the rest as minor random noise.

Minor? Usually.

Random? Not at all. A minor annoyance like a cracked driveway ($1,500 to fix) is also likely to be associated with older kitchen appliances, faulty water pressure, deteriorating deck; poorly seated windows, etc. And then, buying that house for what the algo tells you -- or even algo minus 3% -- isn't likely to be a happy choice. Its fair market price may be algo minus 10% or worse.

Also worth bearing in mind, the Realtor community is not going to make life easy for Zillow. Once it's known that Zillow is loading up on clunkers, buyers' agents are likely to tell their customers: There's a Zillow house on the market, too. It's probably got problems. I'd demand a full inspection and some indemnities if I were you.

Common flaw of market disruptors. They assume that the existing players will remain neutral and indifferent to their arrival. The real world tends to be much tougher.