As an agent, it is very frustrating for me to complete my market analysis, sit back, and then hear the seller tell me why I am wrong, and their price opinion (which is much higher) is correct. It is a fine line to stay "on their side" while trying to educate them, and tell them something they don't want to hear.
This isn't an exact science, and that further complicates the process, as you can have 3 agents come in and wind up with 3 different numbers. There is always a gray area when pricing a home.
It often comes down to deciding whether to take the listing, or walk away from it, if the sellers are being unreasonable. I have lost listings when I came in lower than other agents. But, that happens.
At this point, I usually decide what to do based on how motivated I know the sellers are. If they HAVE to move, I might give them some leeway, and let them get a feel for the market. I am always honest with them, even if they don't like what I am telling them.
The only real test of the market is actually putting the home on the market, and seeing the response, and getting the feedback from the buyers. . Sometimes a seller needs to see this before they will accept reality.