How are home prices determined?

Realtors don't price homes, but suggest a price range to the seller who makes the final decision. This range results from a thorough "Comparative Market Analysis" of the home which the seller may accept, but too often the final list price is inflated and influenced by:

1. Prices seen in the paper or on homes for sale nearby are poor yardsticks as they may be overpriced or not comparable. Recent sold prices of comparable homes are their best guide.

2. They put too much money put into their property and want to retrieve it, but is now overvalued for the neighborhood.

3. Need to sell at a high price so they can buy another home.

4. Wishfully thinking. Some sellers think their 500K home is worth 900K based on a faulty interpretation of the market and will not listen to any proof to the contrary. Realtors should be wary as it will take much time and money to sell such a home.

5. Inflated prices from realtors are sometimes provided just to get a listing. Sellers love to hear high numbers, but should be realistic and get clear justification or additional prices, otherwise their home will face many days on market.