Fresh from today's sales meeting ... if you're having trouble convincing a seller to set a realisting list price, suggest they get an appraisal. And if it helps in the convincing, offer to reimburse the client for the appraisal at the close.

While once an excellent suggestion, market conditions have made such a suggestion a gamble as there's a 50-50 chance the appraisal will come in lower than the sellers' desired price but also higher than prevailing market value. And that leads us to today's question - what is the true, absolute value of a home? (Forgive me, Grantland Rice, for burying my lead.)

First, what is an appraisal? Theoretically, it is supposed to be a measure of a home's intrinsic value as filtered by market conditions. An appraiser looks at comparable sales to find a baseline value based on the market, then adjusts the value according to the subject home's unique characteristics. Simple enough? Well, not really. The main point of the appraisal is setting a value on the home acceptable to the lender. Because the loan is going to based on the lesser of the contract price of the appraised value.

Proof is in the fact that a lender's underwriting department can reject an appraisal value, either requesting a downward adjustment or ordering a new appraisal. The lender isn't nearly as interested in a home's intrinsic value as the amount of risk being accepted with a loan on a given property.

But let's take a optimistic view and say the appraised value matches the sellers' desired sales price. Does that mean their home will sell for that price, that that is the home's absolute value? Absolutely not. And that is because the appraised value, while taking into account recent sales in a given area, does not consider current market conditions as denoted by the current active listings.

When completing a market analysis for a client, I've always recommended looking at the solds vs. the actives as the solds represent actual sales data while the actives represent only those owners' utopian dreams. But in the current market, actives have played an increasingly important part because they represent the competition for the somewhat smaller pool of buyers. And buyers are becoming better at equivocating - they will live without a certain upgrade or added feature if they can save some money on the price.

So does the lowest one or two actives determine a home's absolute value? Maybe, maybe not. Motivation plays a part in pricing. Upgrades play a part, though less than in other market conditions. Location within a subdivision (i.e., backing to a major road vs. a greenbelt) plays a role in differentiating between properties.

Having said that, do the market averages carry far more weight right now than an appraisal's extensive effort?

In a word: Absolutely.