This is the time of year people call and ask me to figure out how much their home is worth, or really what they want to know is how much it will sell for. I look at how much similar homes have sold for recently near the home being priced and I do some number crunching and throw in some experience and come up wth a number that is usually pretty close to what a home will actually sell for.
The process of predicting the sale price is an art and a science. Some of the sellers I represent take my advice on pricing and others choose a price based on how much they need for a down payment on another home or on how much they paid for the house or even how much they think the house owes them.
Ultimately it is the buyer who decides how much a home is worth and the buyers lender either goes along with it or decides the home is worth more or less than what the buyer wants to pay.
Asking more for a house than buyers think it is worth results in more days on market and that ultimately results in a lower sale price because buyers will offer less for a house that has been on the market for awhile than they will for one that was just listed today.
also see What is a free CMA? and How not to price a home and The art of home selling
