What Is The Current Value
The method universally used by professional appraisers, real estate agents, and home buyers for determining the value of residential real estate is to check the 'comps.' These are the comparables: recent sales of homes comparable to the one you are considering purchasing.
How do you know the true prices of comps? Your agent can almost instantly provide you with computer-generated lists of recent sales. When investigating, remember that the age of the comp can make a difference; prices may have substantially risen or fallen more than six months after the sale.
How similar is the comp to the home you’re considering? No two houses are exactly alike. You have to factor in differences in amenities (such as a pool or spa) as well as the more-important size or the square footage. If all factors are equal besides size, a bigger house will sell for more and a smaller house for less.
Are there special circumstances? Sometimes a home’s price has a story behind it. The seller could have experienced a loss in his/her family and needed to sell quickly at any price; the house could have been in foreclosure; or the buyers might have fallen in love with the comp and overpaid. Agents familiar with the sale can inform you about any special circumstances that could have affected the price—this is especially important to discover if one comp is singificantly more or less expensive than others.
It's a good idea to get at least three comps. Five are better. The challenge is to find enough recent comp sales to give a good picture of what the home you're considering is really worth.