What Is a List Price

Breaking Down List Price

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. The listing agreement will also lay out both how the property is advertised and the compensation for the real estate broker. One of the issues addressed in the listing contract is the list price.

In comparison to the amount, the property sells for the sales price. The proceeds recouped by the seller — after the sale — will be the sales price minus any outstanding balance on the mortgage, unpaid real estate taxes, special assessments or any other liens and/or encumbrances attached to the property.

How to Determine a List Price

The comparative market analysis may be the best tool in determining a competitive list price in certain areas. 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. However, the real estate agent most likely will use many of the same techniques and methods that an appraiser would use to arrive at a reasonable valuation for the property. If the property is so unique — either to its geography 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. 

Flexibility in the List Price

Once a list price is agreed upon, it is not set in stone. 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. 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. If a property is in high demand, the sales price can exceed the list price.