With rare exceptions, California law does not regulate the price of real estate. Generally, sellers are free to sell real property for any price that they like, and buyers are free to buy for any price that they like. In other words, the market sets the price of real estate.
How can you tell if the price is fair? The only way to tell is to monitor recent sales of similar properties. Bear in mind that the market may be in a state of flux, and price levels may be changing quickly. Also bear in mind that the price listed on the MLS is generally “asking price” (what the seller is asking for) not the actual selling price, which can vary substantially from asking price.
For many purposes, the law will seek to define “fair market value” of a property. “Fair market value” is generally defined as the price that a willing buyer and a willing seller will agree to, when neither is under undue compulsion. San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 53 Cal.App.4th 918, 925, 62 Cal.Rptr.2d 121, defined “fair market value: as “ ‘the highest price on the date of valuation that would be agreed to by a seller … with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available ’ ” and “the highest and best use for which the property is geographically and economically adaptable”.
Real estate appraisers give opinions on the fair market value of property. They are licensed by the State of California. California Business and Professions Code Section 11300 and after. Generally, a bank will not give you a loan on property without an appraisal indicating enough value to secure the loan. Under some circumstances, if an appraiser gives a very inaccurate valuation of a property, he or she may be liable for this inaccuracy.