Determining your home's price

Here's an interesting question. "Who determines the value of a home?" I have this question asked of me in a variety of ways in a variety of situations. Here are a few examples:
"I have to get $XYZ from this sale, so we have to price it here."

"My neighbor's house sold 3 months ago for $XYZ, and my house is a little smaller but WAY nicer."

"My brother-in-law is a real estate agent in Missouri and he says I should get $XYZ easily."

"You're the 3rd agent I've interviewed, and the first two both said I could get $XYZ."

So who or what determines a home's value? Is it the seller who knows exactly how much they need from a sale? Is it the larger home down the street? Is it the out of state real estate agent? How about the other local real estate agents? Perhaps you've heard of CMA's (no, not the Country Music Awards...Comparative Market Analysis'), do they determine the value? If so, does a real estate agent need to do that, or can the seller do their own? What about the tax value that just came in the mail? What about hiring an appraiser to come out and tell you?

No, no, no, and no. And however many more "no's" need to be added. Current buyers determine your home's value, end of story. What a seller needs to net from a sale has no bearing at all. Your neighbor's home sale may give you a guideline...if it's a comparable home. An out of state real estate agent can't give you any guidance; less than you would know on your own. Other real estate agents should be able to come up with a solid CMA, using other SOLD comparable properties, but again this is only a guide. Your home is worth exactly how much a buyer in today's market is willing to pay for it (in relation to how much you're willing to take for the home).

Real estate agents should be hired to give you a well documented, educated range for what your house should sell for. You should always be able to see a list of the homes that a real estate agent used to determine the value of your home. The agent's other, and primary, job is to market your home aggressively and effectively. A well-priced home that can't be found by buyers won't sell, hence the difficulty with selling For Sale By Owner. Ask the agents you interview HOW they're going to market your home. If the answer is "Put it on the MLS, get a sign in the yard, and hold open houses," keep interviewing. A good agent should show you a marketing plan that makes you think, "Yeah, I can see how that will get my home maximum exposure." A well-priced, strongly marketed home will sell fastest and for top dollar.

Ultimately, the seller is the one with the product to sell, so the seller determines the listing price. Not the agent, not the CMA, but the seller. The seller has the goods, the seller puts the price tag on it. And, ultimately, it's the buyer who determines the selling price. Not the seller, not the buyer's agent, the buyer. If you think that a house is priced too high, offer the seller what you believe the home to be worth. Does that mean I think you should "low ball" sellers? No! Sellers should price their home using a well thought out CMA, buyers should make offers on homes using a well researched CMA as well. Buyers tend to know the housing inventory better than sellers, since they're out there looking. At some point, the buyer and seller will come to an agreement for what the home is worth (or, maybe they won't and the house will continue to sit on the market), and that is your SOLD price. That is your home's value.

A real estate agent should be a guide and an advocate. If you are buying or selling a home and choose to use an agent, find one whom you feel comfortable with (you'll be spending a lot of time with them), whom you trust (they'll be handling a huge decision for you), and one whom can demonstrate a strong knowledge of their market and how to market a home in their market. An agent isn't the one to tell you what your home will be priced at, nor is an agent the one to tell you what to offer on a home. They can ADVISE on these issues, but the decision is yours.

Surprised? Disagree? Have a story that supports this? I'd like to hear your thoughts.