De-Mystifying “List Price”

Whether buyers are just browsing or actively looking to purchase a home, one of the most prominent criteria they consider is the list price. A home’s “list price,” “offer price” or “asking price” plays a critical role in motivating or discouraging buyers and sellers from reaching agreement on a contract to an eventual closing. As you are most likely aware, the list price of a residence is far more complicated than, say, the price of a gallon of milk at the grocery store. In simple terms, the list price is the price which a seller, usually in consultation with their agent, advertises in order to motivate buyers to bring them the highest net price.

 When advising clients on pricing, I always stress that the list price is NOT necessarily the fair market value (FMV) of the home. The home may well be worth far more or far less than the list price. That is why I am not impressed when I hear: “multiple offers above list price.” Similarly, I am not put off by a sales experience in which a seller has their home on the market for 30 days (long by Arlington standards) and obtained a price below list. These two scenarios play out regularly on the ground. For example, buyers sometimes stay away from homes that have multiple-offer “bidding wars,” believing that buying it for above list price is a bad deal. My response to that is perhaps the home was badly underpriced and, in the end, the winning bidder has not overpaid. On the seller’s side, if a seller doesn’t receive an offer after the first two weekends on the market, they can get discouraged. In that situation, given the market climate we have recently experienced it may well be that a price adjustment is needed. And even after the price adjustment, what may seem like a good deal for a buyer is, in reality, still a nice high price for a for a seller.

 What’s most important to a buyer and seller is to choose a price or price range which they believe represents the home’s fair market value. Then map out a strategy on how to obtain the price they seek (higher – perhaps even above FMV – for the seller; lower for the buyer). There are many ways to get from this proverbial point A to point B and I am always happy to discuss these options with prospective buyers and sellers, regardless of where they may be in the process.

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