The asking price is the first number you see on a home, and every number after it gets measured against it: your offer, the seller’s counter, the appraisal. It is the seller’s opening position. This guide covers what goes into a list price, what an estimated value adds, what to ask when the two sit far apart, and how to walk in with a number you chose yourself.

Who sets the list price

The seller sets it, usually on their listing agent’s advice. The agent looks at recent sales of similar homes nearby, at what is for sale now and at how fast homes are selling, and the seller adds their own goals: how soon they need to move, what they still owe on the mortgage, and what they hope to walk away with.

Pricing is also a strategy. Some sellers price a little low to draw several offers, some price high to test the market and cut later, and some price where the recent sales point. The list price tells you where the seller chose to start, and the home’s time on the market tells you how buyers have answered. Ask how long it has been listed, whether the price has been cut, and whether it went under contract and came back.

What an estimated value is

An estimated value comes from an automated valuation model, or AVM: software that estimates what a home would sell for from property records and recent sales in the area. Lenders, listing sites and analysis tools all use them. Before an offer, its main use is giving you a second number that the seller did not choose.

An AVM works from data, so it knows the home’s size, age, lot and location, and what similar homes sold for. It has never been inside. A new kitchen, a failing roof, a busy road behind the fence or a view that sells the house are invisible to it, and so is anything the public record gets wrong. An appraisal works differently: a licensed appraiser visits the home and writes an opinion of value, usually for your lender after your offer is accepted.

When the asking price and the estimated value are far apart

A small gap tells you little, because two estimates of the same home seldom match exactly. A wide one is a reason to ask questions before you offer:

  • Are the listing facts right? Compare the bedrooms, bathrooms, square footage and lot size on the listing with the county record. A finished basement or an addition can appear on one and be missing from the other.
  • What has changed since the last sale? A renovation the records miss can put the home above its estimate, and deferred repairs can put it below.
  • How many homes like it are nearby? An unusual house, a large lot or a mixed block leaves any estimate with fewer good comparisons.
  • Has the market moved? Estimates lean on recent sales, and in a fast market those can trail what buyers are paying today.
  • What is the seller’s strategy? A price well above the estimate may be a starting point the seller expects to come down from, and one well below may be meant to start a bidding contest.

Either number can turn out to be closer. When you look up a home, your free analysis flags a wide gap between the asking price and the estimated value so you know where to look, and the answers to these questions tell you which number deserves more weight.

Where comparable sales fit

Comparable sales, or comps, are the evidence agents and appraisers both rely on. Ask your agent for recent closed sales of similar homes nearby, and read them with a few habits:

  • Closed sales count most. Pending sales show where buyers are now, and active listings show only what other sellers are asking.
  • Prefer recent sales close by. A sale from the last few months in the same neighborhood says more than a closer match across town or from last year.
  • Adjust for the differences. An extra bedroom, a garage, a renovated kitchen or a busier street all move the price, so ask your agent how they adjusted for each.
  • Use price per square foot as a quick check. It hides condition, layout and lot, which are often where two similar homes differ most.

When the comps, the estimated value and the asking price roughly agree, you have a solid read on the price. When they disagree, the comps your agent pulls and the questions above usually explain why.

Walk in with your number

Decide two prices before you write an offer: the price you would be glad to pay, and the most you would pay before you walk away. Set them from the evidence above, and check the top one against your budget too. A price the comps support can still cost more each month than you want to spend, and our guide to what you’ll really pay each month and at closing shows how to work out that ceiling.

Your number also has to hold up at appraisal. On a loan sold to Fannie Mae, the lender measures your loan against the lower of the sales price and the appraised value, according to Fannie Mae’s Selling Guide. If the appraisal comes in below your price, you cover the difference in cash, renegotiate, or use an appraisal contingency if your contract has one. Ask your agent how a contingency would work in your offer before you write it.

Write both prices down before your second visit, and before anyone mentions other offers. A number you set calmly is easier to keep when the decision comes fast.

Then look up the home before you write the offer. The free check puts the asking price beside the home’s estimated value, adds its estimated monthly payment, and gives a score out of 10 for how the home is positioned to appreciate in its market, with its confidence. Your first home is free. Know your number before you offer.