Home pricing

I don't understand how Zillow comes up with these prices. I just spent a large amount of money updating my home to eventually put on the market. My home is a 4 bedroom 2.1 bath which is very rare for the area (most are 3 bedrooms), also my home is the only one on the block with new siding, windows, etc. that I've noticed. Yet, Zillow has priced a much smaller ranch across the street from me for 20,000 higher. It looks like it needs lots of updating. Buyers check Zillow before deciding what kind of offer to make. I've posted pics.
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August 14 2008
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