There are two major differences, though. First, a logical process for determining a list price for a home does actually exist. Second, a homeowner placing their home on the market presumably wants the home to sell. (Hopefully, the mother would elect to price the child so high it won't sell. Hopefully.) Appropriate pricing, in my opinion, is the single most important factor influencing the saleability of a home.

I often remind my homeowner clients that our job is to set the list price, or asking price for their home, and that the market will set the actual price. The goal in choosing the list price is to arrive at a number that approximates the value of your home on today's market, as determined by comparing your home to other nearby homes - with similar characteristics and amenities - (a) which are actively on the market at the same time as the home being listed, (b) homes which are presently pending sale, and (c) homes on which escrow has recently closed.

Despite the fairly concrete and logical steps to arriving at an estimate of market value for purposes of setting an asking price for a home, the emotional issues often interfere, leading to overpricing and causing a property to sit on the market for extended periods of time and acquiring a stigma among agents and prospective buyers. So, buyers and sellers take note - let's correct several misconceptions that rear their ugly heads throughout the ranks of homesellers at all price ranges in every market.

The Market Value of A Home is NOT based on:

• What is was appraised for. Appraisal values are driven more by the loan amount being sought and the lending institution's guidelines than the price a qualified buyer in the present market will pay for a property. Sometimes appraisals will be more and sometime less than the appropriate listing price.
  
  
• What the seller put into it. Most home improvements return less than dollar-for-dollar at the time of sale. (Kitchen and bathroom upgrades and superficial cosmetic improvements to a shabby home are the only ones which typically get close to or exceed 100% return on their cost.) However, the seller was also able to enjoy the improvements to the property during the time they lived there. Buyers do not usually place the same value on them that the seller paid for upgrades.
  
  
• What the seller needs out of it. The money a seller needs to move is a calculation totally irrelevant to what the present home is worth.
  
  
• What a seller wants out of it. Want is emotion. Value is, well, largely math with a small subjective component based on the aesthetic values and other preferences prevailing in the market.
  
  
• What the house down the street, or next door, sold for. Certainly, the closer a recently sold home is to the property at issue, the more power it has in indicating the likely market for your home. However, often rumors abound about what a house in the neighborhood sold for. The price at which a home was listed is often confused for its sale price. Further, houses right next door to one another can vary greatly in square footage, number of bedrooms and bathrooms, and level of upgrading - obviously, creating a huge difference in market value.
  
  
• The assessed value, the insured value, the sentimental value, the value of your next home, etc. I'm sure you are getting the picture by now, but the long and the short of it is that unless a factor influences what a buyer on today's market is willing to pay for any particular home, that factor is irrelevant to the market value and, thus, the price at which you should list - or buy -- that home.

• Today's Market. Seller's market? Buyer's market? A buyer's market will be more sensitive to overpricing. In a strong seller's market, homeowners can actually stimulate multiple offers by pricing on the low end of the estimated range of market values. Your real estate agent or broker should teach you about the present market and the resulting implications of pricing.
  
  
• Today's Competition. The properties on the market at the same time
  
  
• Today's Financing. Interest rates, down payment requirements and terms all influence what a buyer is willing to pay for a property.
  
  
• Today's Economic Conditions. The highs and lows we have experienced over the last 10 years - from dot com to dot bomb to 9/11 and beyond - fill our recent collective memory with some indication of how buyers' willingness to pay can be heavily influenced by the prevailing economic condition.
  
  
• Buyers' Perceived Condition. We have all read the property marketing flyers touting "curb appeal" and "pride of ownership." The "WOW" factor - an overwhelming impression created by an aesthetically attractive, updated and well-maintained house - from the time a buyer drives up and throughout the property, really can increase what a buyer is willing to pay.
  
  
• The Property's Location. Usually, the sale price of recently sold properties within ½ mile of a particular house are the best indicators of what a buyer will actually pay for that house. Buyers are willing to pay more for homes with views; proximity to pedestrian shopping areas; and properties in good school districts. Location is a key element of value.
  
  
• Normal Marketing Time. Hypothetical: Average time on the market in your area is 17 days. A particular house in typical condition for that area has been on the market 75 days. Obviously, there is a range of variability to these things; depending on the state of the inventory, a house in this market could sit for 30 days without anything necessarily being wrong with it. But 75 days? This market is very likely sending this seller the message that the property is significantly overpriced.

What about underpricing? Well, this is a topic for another day, but it is almost impossible to underprice a property. An underpriced property will generate a lot of interest from buyers, often leading to multiple offers and an upwards market correction of the price.