My wife and I were in Lexington, Virginia visiting our daughter recently.  We went for a walk to get some coffee and passed by a beautiful home.  It happened to be for sale and we picked up a flyer out of the box out front - it was listed for $1.5 million.  I automatically thought that this house was not worth $1.5 million, especially when the house down the street that was similar was priced at $500,000. 

My wife looked at me and said that there was no way I could know that this house was worth because I was not a Realtor in this area.  Real estate works the same in all areas – there is a pecking order for properties.  You don’t have a lot of buyers in Lexington, Virginia looking for a $1.5 million dollar property on 6.5 acres.

I once went on a listing appointment and the seller told me that they wanted $10 million for their oceanfront home.  I knew there was no way she could get that when her next door neighbor’s home was on the market for $5 million.  She said her house was slightly larger – which it was, and her home had 5 bedrooms rather than 4 bedrooms – which it did, and that the pool was larger – which it was.  These factors; however, did not mean that the house was worth twice as much. 

It sometimes amazes me the price someone will put on a property.

When someone is trying to determine the value of their home, I think it is important to look at the competition.  I often tell people that the price of their house is not determined by me, but that it is determined by the market and the buyers in the market.