Why is this being downvoted. It's completely correct. The value of a home purchase is not just the building, but the land it sits on.
OP got a bigger, more modern house, with a larger yard for less, but it's meaningless until we understand the market circumstances of both homes for sale.
It could be that Zillow is overpriced here, or it could be that Zillow is properly priced, we have no idea from the information provided here.
Because better is subjective. NYC has more crime, worst public schools, and smaller homes than a lot of suburbs, but I guarantee that NYC is more expensive.
It's an extreme example, but it's not the only example.
If this wasn’t another house in the same neighborhood then the differentiator most certainly wasn’t Zillow or their pricing.