The list price of a home is just an asking price. Use these negotiating strategies to buy the home you love.
In this article
House hunting can get confusing, especially when it comes to pricing.
Let’s say a beautiful home catches your eye. It’s perfect! What do you do if the listing price is a little outside your budget? Ask your agent if they think there’s room to negotiate. Remember a listing price is just the beginning of a negotiation. So, what does a home’s listing price really tell you as a buyer?
First-time homebuyers are often surprised to learn that a home’s list price is rarely fixed. And if you know how to negotiate, you can land a home you love without sacrificing your budget.
Points to remember:
- A home’s list price is not the sale price
- Sellers and their agents determine the listing price by considering several factors, including location, the home’s condition, and similar sales
- You can usually negotiate a home’s price if it needs major repairs, it’s been on the market for a long time, or if you can make a cash offer
- When negotiating prices, rely on your agent’s real estate expertise
What is a home’s list price?
A home’s list price is the asking price a seller sets with their listing agent. This is the dollar amount you see on the listing when looking at a home, and it can increase or decrease while that home is still on the market. A listing price isn’t the same thing as an appraisal or a home’s sale price. Instead, there’s usually room to negotiate.
How do sellers determine a home’s list price?
Before you try to negotiate the sale price of a home, it’s important you understand how sellers arrive at the list number.
If a seller underprices their home, they leave money on the table. But it’s even more dangerous to overprice a home because it leaves out an entire pool of potential buyers. So sellers will usually work with a listing agent to determine the best list price to cover all their bases.
So how do they find the right balance? There are several home pricing strategies agents use to find the best list price.
You know the old real estate adage: “Location, location, location!” There’s truth to that. A home’s city and neighborhood can drastically affect its price.
Here are several location factors that affect list price:
- Quality of nearby schools and distance from them
- Access to public parks, pools, libraries, etc…
- Crime rate
- Neighborhood’s quality, cleanliness, and noise level
Square footage of home and land
A 1,200-square-foot home won’t be as expensive as a 3,000-square-foot home. The same can be said of the property’s land. Bigger lots, especially with wide-open yards, increase a home’s price. So if two homes are the same size, the one on the larger lot will likely have a higher list price.
Condition of the home
If a house needs major repairs, an agent will usually lower the asking price. Even cosmetic issues such as dirty or mildew-covered exterior walls can make an impact.
The better the house’s condition, the higher the price. That goes for quality renovations, too. Here are 2021’s top value-increasing home upgrades:
- Garage door replacement
- Manufactured stone veneer for exterior
- Minor kitchen remodel
- Fiber-cement siding
- Vinyl siding
- New wood windows
- Wood decks
- Steel front doors
- Composite decks
- Fiberglass front door
Value of nearby similar homes
Real estate agents will also do a competitive market analysis to determine a good list price. They’ll research the recent sale prices of similar homes in the area. This shows what buyers are willing to pay in that market.
How to negotiate a home’s list price
Remember, a home’s list price is not the same as the sale price. So you might be able to negotiate. According to a Flyhomes survey in 2020, 36% of homebuyers felt they spent more money than they were comfortable with, and 20% said they paid too much for their home. Negotiate to avoid that regret.
How much you can negotiate depends on whether you’re in a buyer’s market or a seller’s market. In general, though, if you find things wrong with the property, you can make an offer that’s lower than the list price.
For example, if the house needs a new roof, has foundation issues, or needs upgraded electrical or plumbing systems, you may be able to offer as much as 20% below the asking price.
But if the home only needs minor upgrades, 20% lower is often too drastic of a counteroffer. And if the home is in top condition, it’s best to stay within 1%-to-4% of the asking price.
Here are several ways to negotiate the list price of a home and come away with a bargain.
Rely on your real estate agent
Not only does your real estate agent understand negotiation jargon, but they also know your market inside and out. Let them help you craft a strong home offer. After all, they know how low of an offer you can make without losing the seller’s interest.
Get a thorough home inspection
A major problem with the home is the most common reason for a home to sell for below the asking price. But you won’t know if there’s anything wrong with the house unless you get a proper home inspection.
Not sure what to expect? Use this home inspection checklist for first-time buyers to get started.
Provide a preapproval letter
There’s a difference between prequalification and preapproval. Your lender likely gave you a prequalification letter before you even started house hunting.
A preapproval letter shows the specific mortgage amount your lender says you qualify for. Sellers are much less likely to ignore an offer with a preapproval letter. It’s even better if you can get pre-underwritten with Flyhomes Mortgage. The seller may be willing to accept a lower price if they know your financing is secure.
Check how long the home has been on the market
If a home has been available for longer than the average amount of time—which depends on the market—it may be because the asking price is too high.
After a while, sellers get restless. If you notice that the home’s asking price has already decreased while it’s been on the market, that’s a sign to negotiate for a lower sale price.
Ask for seller concessions
Lower the price you pay on a home without actually lowering the list price. Buyers can save money by asking the seller to cover additional closing costs. If it means closing on the home more quickly, some sellers will say yes.
Closing costs you can ask your seller to cover include:
- Appraisal fees
- Inspection costs
- Credit check fees
Make a cash offer
An all-cash offer can give you more room to negotiate than you realize. Here’s why sellers prefer cash offers:
- Faster and simpler closing
- Lower risk of the deal falling through
- Fewer contingencies
- No appraisals required
There’s always a chance that your lender will back out if you use traditional financing. But a buyer already has the cash when they make a cash offer. Flyhomes helps you make a cash offer so you don’t have to put all your own cash up front.
Nearly all lenders require an appraisal, which takes time and runs the risk of valuing the house lower than the agreed-upon sale price. If that happens, the deal can fall through.
How to make a cash offer when negotiating a home’s list price
Contrary to its name, a cash offer hardly ever involves actual cash. Instead, the buyer usually wires the money to the seller.
The key, though, is having the money in your bank account. With programs like Flyhomes’ Buy Before You Sell, you can get a secure short-term loan to make a cash offer. Once you’ve closed on the home and moved in, you can sell your former house and take out a long-term mortgage on your new one.
When searching for a home you love, don’t always take list prices at face value. ellers are often willing to negotiate, especially in a buyer’s market. And if you can rely on your agent’s expertise, get a home inspection, provide a preapproval letter, or make a cash offer, you’re setting yourself up for homebuying success.
What does the list price of a house mean?
The list price of a house is what a seller says they hope to get paid for their home. This price is not usually fixed. Instead, sellers may be open to negotiating a sale price that works for both parties.
The asking price can also change while the home is on the market. If a home’s list price continues to go down every few weeks or months, that could indicate the seller is eager to sell the property quickly.
Do homes usually sell for the asking price?
Sometimes they do, but houses can also sell below or above the list price. It depends on the housing market. For example, in June 2021, 54% of homes sold above asking price even though only 26% did so a year earlier.
If the seller is eager to sell the home, if there’s major damage, or if the home has been on the market for a while, the house may sell below list price.
How do I know if a home is worth the asking price?
First, hire a professional to do a home inspection. This will show you if the home has any flaws or damage that you can use to bargain with the seller. Next, look at similarly sized homes in the same area and see if they’re around the same price. If the list price is higher than most other homes like it nearby, then you can likely negotiate with the seller.
How do you find the list price?
You can easily find the list price online, although online house listings aren’t always reliable. Your real estate agent can also access it for you. But remember, the list price is not the same as the sale price unless the seller won’t negotiate.
How do you calculate list price and net price?
Sellers and real estate agents calculate list price by factoring in the size and condition of the home and lot, the home’s location, and the value of similar homes.
The net price is the money the seller keeps after closing costs. To calculate the net price of a home, subtract from the sale price all the seller’s related costs, including the appraisal fee, the sales fee, real estate commissions, the title insurance policy, and their portion of property taxes for the year.
About the author: Jenny Rose Spaudo is a content strategist and content marketing writer specializing in real estate, PropTech, and investing. She’s written for Business Insider, PropStream, and more. Visit her website at jennyrosespaudo.com and connect with her on LinkedIn.