In most instances, the correct answer will not come from the owner. Quite simply, owners mostly think their home is worth more than what it really is. It’s an actual observable economic and psychological phenomenon, called the Endowment Effect. We feel that something is worth more simply because we own it. Buyers, on the other hand, very quickly become experts in value once they start looking in earnest. Buyers can actually use this to nab a bargain as will be explained. By the way, the correct and simple answer to the original question is, “the highest price a buyer will pay”.
The best means to establish the value of a property is to employ the services of a valuer. They undertake years of study to learn how to best assess true value. The most reliable means is to compare similar properties and make the necessary adjustments (time, size, services, features etc). Agents are pretty good at it as well but they sometimes have a conflict of interest. You pay a valuer for an independent figure. What that figure is does not affect their income. They get paid anyway. Agents get paid if they get your business and what is most likely to help them win the business? Telling an owner what they want to hear or telling them the truth? See the challenge?
It’s the main reason agents have such a consistently poor reputation in surveys on trust for different professions. Because quite often they lie. But back to assessing fair value. Whilst buyers can be demonstrated to be the best judge amongst the different players in the property game, it essentially comes down to competition and supply and demand. That’s how pricing works in our capitalist society. If competition is strong, the price will increase. If it is poor or almost non-existent, prices fall.
It’s counter-intuitive but the way to generally achieve the highest selling price is have a lower asking price (within reason). This creates competition. By setting the price too high (for fear of selling too cheap), owners can shoot themselves in the foot. Price too high equals no interest and no competition. Exactly the opposite of what was being sought; the higher the asking price, the lower the sale price. Once buyers have considered the fresh now listing, it will take a significant drop in price to attract their interest back.
So, to protect yourself and achieve the highest price, vendors should either get an independent valuation or find an agent they can trust. And buyers? Well watch for the overpriced properties and when they don’t sell and the price is eventually dropped to attract interest again, be ready to pounce. You might just snare a bargain.