Asking Price vs. Selling Price

Asking Price vs. Selling Price

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What is the difference between the asking price and the selling price of a property?

There are a lot of new and confusing terms and words used when you are buying a home or selling. There are many terms and it is important to understand each and every term. Buying or selling is a sensitive time, which puts one in a  position to compare and contrast the value of the target home with the value of similar homes around it based on a variety of factors such as amenities, location, features, land size, and property size. The difference between the asking price and the selling price is simple.

·         The asking price is how much the home is listed for.

·         The selling price is how much the home actually sells for.    

The difference between the two amounts depends on elements such as the market in the target area and other comparative features of the property, such as the number of bedrooms, garages, and how far it is from basic amenities. Knowing what the asking and selling prices are is only the beginning of buying or selling a home. Let's go beyond asking and selling prices into the details.

The Market

One of the most important things to know when buying a home is how much control you have, this includes, knowing exactly how much you actually qualify to buy for. This is measured by how much demand there is for houses in the target area, and is called either a "buyer's market" or a "seller's market." In a buyer's market, there are many houses available and few buyers, while in a seller's market, multiple buyers would likely want to make an offer on the same house. 

As a seller, this will inform and guide your asking price and help make the selling price as realistic as possible. You can usually determine which type of market an area is by looking at how long houses remain in the market. The longer it remains in the market then a seller's market, so be prepared to negotiate against other buyers.

How to Compare

Knowing the selling price of other houses with similar features in comparison to that of your own, in your area can help you come up with a fair asking price and buyers know how much homes in an area are worth. Comparable homes are ones that have recently sold (the more recent, the better), are close to the target home, are about the same size as the target home, and are close to amenities or within a similar proximity. A sample of local area home sale prices can tell both buyers and sellers what a fair asking price would be for any home.

How to Determine Asking Price?

If you are a seller, the factors you want to weigh also include how attached you are to the home. Many sellers set asking prices that are unrealistically high because their attachment to the home causes them to overvalue amenities. Does the yard have a custom pool? Is there a day room off the master bedroom?

These are great selling points, but not necessarily huge moneymakers. Local property values can give you a starting point to work with, but in a buyer's market, be ready to accept a little less.

Buyers need to be even more aware of the market because as the ones making the offer, it is up to them to start negotiations.  A low offer in a seller's market can lead to an offer being turned down or even ignored, and even in a buyer's market offers should not be so low that they insult the seller. Buyers also need to know local market prices and get comparisons. After all, this is an investment of hundreds of thousands of Rands, as well as the security of everyone who depends on you! Be prepared to negotiate until a compromise is reached on the price, and then you can make a formal documented offer, locking in your bid on the home.

The difference between the asking price and the ultimate selling price has a lot of effect on real estate. How much a home is sold for influences the prices of the homes around it, and gives an idea of the value of homes in the area. Both buyers and sellers should make themselves aware of such information so the two can meet in the middle and get the home sold!

Author: 4230