Real estate agents determine the value of a home by doing a comparative market analysis, CMA for short.
The comparative market analysis will take your homes qualities (age, location, size, construction and style) and compare it with homes of the same caliber that have sold within the last 3-6 months.
Agents will make adjustments if the subject property and the comparable properties differ slightly. Things that could differ would be a slight age difference or improvements that are on one property or not the other. Agents will use 3-5 comparable properties to get the most accurate idea on what your home should be listed at.
They will also evaluate the neighborhood. This method is used because it determines the best price to list your home, so that you are not over pricing, or under pricing leaving yourself without a suitable buyer.
Agents use a specific software to give you a full CMA report that includes all of the vital information you will need to understand the best price your home should be listed for.