Market value isn't necessarily what the home is worth; it's what someone is willing to pay for it.
Market value will vary depending on market conditions and the economic climate. We've seen examples of this in recent years during which changes in the high-tech sector had first positive then detrimental affects on the prices of homes in Silicon Valley. Even at different times of the year, market value can change. More people are likely to sell in the warmer Spring and Summer months, and when there are more homes on the market, prices decrease. Homes are pricier if there are fewer in a given area to choose from.
When a seller sets the list price, she may be influenced by several factors. The real estate agent usually provides a comparative market analysis, or CMA, which shows comparable homes that have recently sold or been listed in the area. Based the CMA, the relative condition of the property and some other variables, the realtor suggests a reasonable list price. The seller is not obligated to agree with the realtor, and may choose another list price. The seller may need to move quickly and be motivated to list low, or she might want to get the most she can out of the sale and list high. The realtor may agree to a price that's off the mark rather than risk losing a commission.
Therefore, the list price cannot be seen as a reliable figure. When the buyer makes an offer, he often feels he's getting a good deal if the accepted price is lower than the list price. But the reality is, the list price may have been too high to begin with. That's why it's very important to do research prior to searching for a home. Your realtor can provide you with a CMA of homes that are similar to the one you're interested in, and will be able to take you to some of these homes so you can get a good sense for how the property in question really compares.
An appraisal may be far more accurate at predicting market value. Unfortunately, sellers are often deterred from ordering appraisals because of the cost, especially since they know the buyer's lender will order an appraisal during escrow. However, an accurate appraisal can help zero in on a fair list price that might benefit the seller in the long run.