 Personal Finance PowerPoint Presentation List Price Get ready to get financially fit by practicing personal finance. Most of this information can be found at Investopedia List Price, which you can find online. Take a look at the references, the resources, continue your research from there. This is by James Chen, updated February 15, 2022. The List Price. What is it? The List Price in the real estate world is the suggested gross sale price of real estate property when it is put on the market. So that doesn't necessarily mean that's the price it's actually going to be selling for, but that's going to be the price that in normal circumstances the seller and the broker have come up with to basically put the property on the market. Breaking down the List Price. The Listing Agreement is a legal contract between the property owner and the real estate broker. So clearly when the owner is thinking about selling property, they will usually be working with a real estate broker, the broker in essence being an agent of the owner working on the owner's behalf. The contract between them is going to be a legal contract putting out the terms of their relationship. So once again, the Listing Agreement is a legal contract between the property owner and the real estate broker. The type of Listing Agreement determines the nature of the relationship between the two and what is required of the real estate broker. So clearly you could imagine some variance to the relationship between the seller and the broker and obviously you want to lay out the terms of the contract so everybody is clear about them. So the Listing Agreement will also lay out both how the property is advertised and the compensation for the real estate broker. So clearly the real estate broker will be involved in part on the selling side of things with advertising the property, with putting the property out there. And you also want to make sure that you have laid down what the compensation will be within the contract. One of the issues addressed in the Listing Contract is the List Price, which you're going to be listing the property for as you market it. So in comparison to the amount, the property sells for the sales price. So the sales price may be different from the List Price. The List Price is what you're putting it out there for, but that's not what the closing deal is going to be at the end of the day possibly. So the proceeds recouped by the seller after the sale will be the sales price minus the outstanding balance on the mortgage, unpaid real estate taxes, special assessments or any other liens and or encumbrances attached to the property. So now we've got the List Price, which is the price we've determined to start basically kind of advertising, putting the market, the property out there. We've got the sales price, the amount that we're actually going to be selling for. And then we've got the proceeds for the seller. How much the seller is actually going to get, which is going to be the sales price minus all this other stuff. Remember the proceeds recouped by the seller after the sale will be the sales price, not the List Price but the sales price, which you've actually determined at the end of the day minus any outstanding balance on the mortgage. So obviously you're going to have to take that money. If there's an outstanding mortgage, pay off the outstanding mortgage with it, unpaid real estate taxes. So if you have to pay any taxes that are unpaid taxes, special assessments or any other liens and or encumbrances attached to the property. How to determine a List Price? That's the trick, isn't it? That's the million dollar question. We put the list price out there. What should the list price be? So we got the comparative market analysis, maybe the best tool in determining a competitive list price in certain areas. So most of the time you're going to be looking around. You're going to be saying, let's do some kind of appraisal here. Let's try to think about what other properties have sold. There's many tools online that can help us to determine properties that are sold. But it's not a perfect science because of course our property is unique. The timeframe that we're selling the property is unique and it has a big impact. The current market will have a big impact on everything else as well. And the location is unique, right? So we could get our best estimate by looking at other properties oftentimes, but it's not going to be a perfect situation. And clearly you can imagine some situations where it would be easier than others. If you're in a place where all the houses are all the same, look and feel for them, and you've got a whole lot of sales that have been happening recently, then you would think you'd get a pretty good feel for it. But if you've got a house that is quite unique, it's looking quite different than those around it, or maybe there are no houses immediately around it, then it could be quite unique in nature and in location, which can make it a bit more difficult. So the real estate agents usually perform this type of analysis as they research the prices of similar properties sold in the vicinity. Being that no two properties are exactly alike, agents will make proper adjustments to account for differences among houses sold in a specific area to come up with a fair list price. A comparative market analysis is not an official appraisal. So it's basically you're doing your best to do an estimate. It's kind of a type of appraisal, but it's not an official appraisal for terms of like to meet the satisfactions of like a lender might need to secure the home to get the loan, for example. However, the real estate agent most likely will use many of the same techniques and methods that an appraisal would use to arrive at a reasonable valuation for the property. So you're not hiring an appraiser. When you sell the home, you're hiring a real estate broker. But the real estate broker is basically when they're coming up with a list price doing a similar kind of job as the appraiser, it's just not a formal appraisal process. If you were getting an appraisal for other reasons, then you would call you would call the actual activity of doing a similar activity and appraisal. So if the property is unique either to its geographic or in its structure that no comparable properties can be found, the owner may need to hire a formal appraiser to determine the list price. So most of the times you would think that the brokers would be fairly good at looking at competitive properties and have a feel of what houses are selling for in a particular area. But if you've got a home that's not close to anything else or it's completely outside the norm of anything else, most brokers in the area who have experienced selling homes in the area don't have experience with that particular home because it's unique in nature and therefore you might need different techniques to get a fair appraisal. Flexibility in the list price. Once a list price is agreed upon, it is not set in stone. So it's not set in stone yet. Different variables can cause the owner to either raise or lower the suggested cost of the property while it is still on the market. If the list price is firm, it means that the seller is not willing to negotiate. So when you're listing the price, you could have flexibility with the list price and you could be saying, hey, this is a firm price. I don't want any negotiation. I'm not going to sit here and haggle with people or you might put the list price out there and be like, this is what I feel like it should be. I'm open to hear negotiations and hagglings and whatnot. In many instances, however, the list price is set with the expectation that a potential buyer will offer less and so the list price is preemptively set higher than what the seller expects. So clearly that would often be the case if you're going into a negotiation process and you're expecting someone to come back at you with a counter offer, then you're probably going to set the price high and then you're going to expect that counter offer to come in and they're going to set it low and then here we go with the negotiation. You're familiar with this process. So you typically want to start at a high bar if that's the method that we're going into and the real estate broker hopefully can help with that kind of process. So if a property is in high demand, the sales price can exceed the list price.