Have you ever wondered how people come up with housing prices? It can be tough to nail down what your home is worth. It’s a combination of art and math. This goes for both sales and rentals.

First off, when pricing a home, you want to look at the comparables, or “comps” as they’re often referred to. Comps should be similar properties that have closed in the same neighborhood or building within the last 6 months. It’s important to stay within 6 months because that better reflects the current market and is typically the industry standard when evaluating residential real estate.

Sometimes comps can be difficult to find. In that case you may have to go out 12 months or slightly longer. You may also have to look in nearby similar neighborhoods or make some other compromises. Though these will be weaker comps.

Things I would not do when pricing a home include using properties that have not yet closed, using a real estate website’s automated value calculation as the end-all-be-all or relying on what Joe down the street says he sold his house for. Use solid and reliable data that you can show to an appraiser if need be.

Ultimately, you can price your home at whatever you want and even get a contract on it. But if the buyer is getting a loan, odds are an appraiser will be looking at the same data you and your Realtor are. If the appraisal comes in below the sales price, that can create a problem with how much the bank is willing to lend.

Looking at the numbers and comparing them with other properties is the math part. But there is also the “art” of determining a price for a home. How does the house look in person? Does it show well? What about smells in the house? What about the paint color? There are so many factors that you can’t quite quantify on a dollar basis. Instead, they may make a buyer feel a certain way and ultimately choose that house over another one on the market at the same time.

Coming up with a price is a valuable skill in itself. But even if you think you’re doing everything right, ultimately the market will tell you. If you aren’t getting many showings and activity is slow then you either have a very unique property or it’s likely not priced where the market is at that moment in time. No activity at all is still a response from the market. On the other hand, if you’ve got 11 offers and a line of showings out the door then you are likely priced within or even slightly below where the market is at that time.

If you are curious about the value of any piece of real estate, let me know and I’m happy to weigh in. Even appraisals are subjective. One appraiser may come up with a different value than another. But a bias-free third-party opinion from a professional who has actually walked the property will almost always be more accurate than an algorithmically generated value from a system that could never fully evaluate the property in person.