List price vs sale price: Know the difference
What’s the difference between listing price and sale price, and why are they often so different?
Listing price, also known as asking price, refers to how much a seller has listed a property for, and sale price refers to the amount it actually sells for.
There is a lot of media attention these days about homes being sold well above their listing or asking price. In a sellers’ market, where market conditions favour sellers, it’s not uncommon for multiple buyers to make offers, with the final sale price sometimes far exceeding the asking price.
It is important to note that a seller has the right to set the asking price at whatever amount they believe is the best strategy to sell their home. RECO does not regulate the decisions of sellers or buyers.
At one time, a common seller’s strategy was to set the asking price close to or even slightly above the best estimate of what the home was worth, and the final selling price would end up being very close to the asking price.
However, in a hot housing market with low interest rates, more buyers find themselves in heavy competition for fewer properties and some sellers have the expectation of cashing in. Keep in mind, though, that there is nothing that obligates a seller to accept any offer if they don’t achieve what is their ideal price.
The listing price is one of several marketing tools that is used to generate interest in a property. A seller can intentionally decide on an asking price that seems low, high, or in line with the market value.
In a competitive market, a seemingly low list price can be used to generate competing offers that can drive up the selling price. A seller may also decide to list their home above its market value and take a chance it will generate offers from willing buyers.
In either case, the seller has the ultimate right to choose the offer that best meets their needs (price, closing date, or some other favourable conditions) or none at all.
All of this adds up to a complex marketplace that presents challenges to both sellers and buyers.
That’s why I recommend you work closely with a real estate agent who knows the local market well to determine the best strategy, either for selling or buying a home.
If you’re a seller, an experienced agent can obtain detailed information about the asking prices, selling prices and other features of homes that have sold recently in your neighbourhood. They can then advise what you might expect to sell for, and a strategy to achieve that — or more.
A buyer’s agent also uses the same information to help the buyer decide on their purchase strategy.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.