The home owner/seller gets to decide what the asking price will be. Most homes on the market are priced with the help of a real estate agent. We determine how much the home is likely to sell for based on the actual sale prices (not the same as the asking price) of homes in the immediate area that are similar to the home being priced and that have been sold recently. Size, condition and location determine value along with supply and demand.
A similar home will probably be a home that was built around the same time and is the same or similar style and has the same number of beds, baths and garage stalls. That explanation is a bit simplistic. We actually use a kind of fuzzy logic based on experience and knowledge of the area. So far there isn’t any software of web site that can replicate what an experienced real estate agent can do.
Most homes are going to get an appraisal too but that is done by the buyers lender after the seller has accepted the offer. The purpose of the appraisal is to help the lender decide if the value of the home is at least high enough so that it can be used as collateral to cover the loan. Appraisers and real estate agents can be wrong.
Home owners have all sorts of ideas about how to price a home. Many believe that over pricing is better than underpricing and some people like to “try” it at a certain price. Sometimes home owners will contact a few agents and have each one determine a value and they will choose the highest value. Real estate agents are aware of this and will sometimes aim high to win the listing. Just like real estate agents and appraisers sellers can be wrong about value and so can buyers.
Pricing a home isn’t an exact science. If it were my job wouldn’t be nearly as much fun.
Also see:
Is your home priced higher than the zestimate?
