The first thing you need is a great real estate agent who will put together a CMA (Comparative Market Analysis) for your property. Simply stated, the CMA brings together the recent sales in your area along with the number of days it took each of those listings to sell. Ideally, your CMA should list only those properties within a ¼ to a ½ mile from your home (this may differ in major cities, where, for example, two blocks North of 96th Street in New York is an entirely different property than one two blocks south).
You will also want to be sure that you are getting a true “apples to apples” comparison. For instance, if your home is a 100 year old Dutch Colonial in desperate need of updating, it is not a true comp for a house half a block away that was built in the late 1980s. Similarly, if your three bedroom home has two baths, but the three bedroom a block away has 3.5, then that house is not a “true comp” for your own.
You will then need to compare lot sizes and square footage among the comparable listings in your area and adjust your price up or down accordingly. It could be that your Dutch Colonial actually has another 400 square feet of usable space, because the 80’s McMansion has a cathedral ceiling in the entrance hall killing a lot of usable space.
The other numbers you want to look at are the price reductions for each property. When properties linger unsold for a long time, you will probably find quite a few price adjustments and this should spur you on to make sure your property is priced to sell the first time. Even if you can say, “Hey, I’ve got time. Let’s price it higher,” with the possible exception of a real estate market where property values are appreciating, time is usually not on your side and you could end up costing yourself a lot of money. Even in a neutral market, overpricing will simply lead to your home sitting on the market going nowhere. Far better then, to price it in today’s dollars and watch it get snatched off the market.