Answer: You simply look at what other folks have been paying for similar properties in recent history. Or ask your Realtor to 'run comps' for you.
I just had a client ask to show them a FSBO (for sale by owner) home that was priced at $350,000. I said I'd love to, but I first wanted to see where the seller got their price from. Turns out, the home was listed about thirty or forty thousand dollars too high.
Now, had someone contracted to buy the home for 325K, they would probably think they were getting a deal (wow $25,000 off list price!) when in reality they would've overpaid by at least 10 thousand dollars as the home is worth about 295-315K in the current market. Just goes to show - the asking price on a home is not always based in reality.
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I'm Zane Gerringer, and I work full time as a Realtor in Greensboro, NC. I believe owning a home and investing in real estate are essential in building a secure financial future for your family. I love representing both buyers & sellers, and I want you to make smart real estate decisions in the Triad!