The Listing Price Fallacy

What exactly is a listing price? We have many conversations about prices of homes and negotiations with buyers and sellers often get contentious when discussing listing prices. Why?

We all know that a listing price is the price which sellers hope to get. In fact, the listing price is the only price that a listing agent can suggest offering without failing their fiduciary responsibilities for their client (which is the failure of "dual agency"). That being said, why is it that all properties don't sell for 100% of the listing price then?

The "price" of a house is not controllable by the seller in any way. "Price" is determined by the value association the interested buyers place on it. So what is an "asking/list price?"

The list price of a property must be seen by sellers as nothing more than a marketing tool for their property. It is the goal of every seller, with the assistance of their agent, to market the property in a way which will attract the highest concentration of potentially interested and qualified buyers. Once interested those buyers, with the assistance of their agent, will compare the relative value offered by that property to what is currently available on the market and then make the value judgment. This value judgment is a subjective analysis tied to the desires of each individual buyer. Your house might be the only one with two deeded garage parking spaces, but if you live in a one bedroom and are attracting young professionals who don't own multiple cars, the $60,000 cost of two garage parking spaces might not be worth it to the buyer. That $60,000 might get them an additional bedroom elsewhere. So, in essence, your listing price has to reflect your current competition, the perceived value of your home relative to the market and many other factors that unfortunately a seller does not have control of. The only thing the seller can control is the condition of their property. If your home is presentable and you have maintained it well you can create a competitive advantage for yourself. You cannot move your home from a busy street. You cannot knock down or replace the building next door. Unless you know someone powerful you cannot make yourself any closer to public transportation.

What does this all mean? You must take your desires as sellers with a grain of salt. We all want the highest offer possible. The way to get this is to pick a competitive listing price, not necessarily a high listing price. Competition raises prospects for everyone. The stronger you can compete in the market the better your results will be.