The terms list price and sale price are often used interchangeably. What you might not know is that they both represent two completely different values.

They can get confused because they both sound like they are talking about the same thing. You're selling your home, so you're listing it at the sale price, right? Not quite. Many homeowners and realtors will list a home at a higher price than they anticipate to be the selling price. Keep reading to find out the nuances between a listing price, sale price, and how the market can dictate each one. 

Here's the list of items that are discussed in this article: 

• List Price or "Asking Price"
• Sale Price
• Appraised Value
• Market Value

All of these standard terms are intertwined in some way. Still, it's essential to understand the difference to understand the buying or selling process better and communicate with realtors. 

List Price or "Asking Price"

Sometimes known as the "asking price,"  list price is the posted value of the home. The number that you see on the listing site or on the yard sign is what experts call the listing price. Typically, the list price is much higher than the sale price because the sellers anticipate a counter-offer that is lower than the asking price. 

There is an art to selling a home. Since it is customary for the buyer to find reasons to ask for a lower price, the sellers typically overprice the home. An overpriced home is only the listing price, and both the buyer and seller know that they can negotiate the price before closing. 

Keep in mind, the seller doesn't have to budge for a lower price, but they may lose a buyer's interest if they decide against negotiating. Most sellers will agree to a lower price to keep the buyer's interest and make the sale. In cases where the market is competitive, or the seller feels like they can get a higher sale price, they may hold out for a better offer. Otherwise, they compromise to ensure the house gets sold. 

Sale Price

The sale price is the final value of the home once it has been sold. This value is generally different from the listing price because of negotiations. Sometimes the buyer might agree to pay the listing price and won't ask for credits or discounts, but that is rare. 

In a competitive market, the sale price can even be more than the asking price. For example, if multiple buyers are interested in a home, they might get into a bidding war. In this scenario, the sale price could rise above the asking price. A seller can reap the benefits of a competitive market when multiple people are interested in their home. Consider it a major win if the sale price is equal to or above the asking price. 

The seller's goal is to list the home at a higher price, so they get a sale price close to the house's actual value. Appraisals and pricing experts play a significant role in determining value. The strength of the market can make appraised values fluctuate based on supply and demand. As a whole, the sale price is the final result of how the buyer and seller agree to negotiate values and the asking price. 

Appraised Value

The appraised value is a professional valuation of a home based on tons of factors. Typically, an appraiser has been involved in a market for a long time, either as a real estate agent or a lender. While appraisals are subjective, there are usually a few key factors that will guide the bulk of the appraisal.

For example, most homes are priced similarly based on square footage, number of beds, baths, and location. Other factors include the home's condition, the strength of the market, and how it compares to other similar homes in the area. For a more detailed description of how appraisers evaluate a home, check out another blog titled "How to Determine Your Home's Value."  

If a seller decides to have an appraisal before listing their home, it might impact their listing price. Lenders will always require an inspection and appraisal at the buyer's expense, and they could come back and ask for a price reduction after the appraisal. We recommend sellers have an appraisal before deciding on a listing price so they can minimize the risk of listing the home too high or too low. 

An important tidbit to remember is that the appraised value of a home can vary based on the housing market's strength. This reality means appraisers have to consider the condition in the market in their valuation. The next section defines market value and talks about how the market can impact a home's value. 

Market Value

Market value refers to the impact supply and demand can have on home sales. Supply means how many homes are for sale, and demand is the number of interested buyers. If the market has tons of buyers and not many sellers, those who choose to sell can get away with asking for a higher price. On the other hand, if there are many houses for sale, the buyer can get away with a lower price. Either way you look at it, the market is dictating the outcome.

Let's say you're looking for a home to buy. There are tons of viable homes on the market, so you can be picky. If you tour a home and would like to make an offer, you can afford to ask for a lower price because if they decline, you can move on to another home. Likewise, if you can see yourself buying only one or two homes, you have to be much more careful about negotiating a price. The market has impacted the value of the house. 

The seller's perspective is the same but from the opposite side. If there are tons of potential buyers, they can decline an offer that they think is too low. On the other hand, if they only have interest from one buyer, they have to decide how desperate they are to sell the home. It's valuable to understand what kind of market you're in before you make any important decisions. If you play your cards right, you can use the market to your advantage and get the better side of the deal.