Whichever side of a real estate transaction you’re on, there is a very important question that must be asked when a home is bought or sold: How much does it cost? The answer is determined by a number of factors, and it can change from when the home is put on the market to when the sale officially closes. But when a home is first listed for sale, there’s an initial dollar amount that the sellers ask for: the asking price.

What is asking price?

A home’s asking price is the amount of money that the seller wants a buyer to pay for it, at the moment they list it for sale. “This price is determined by the agent and the seller as a marketing price,” explains Benjamin Dixon, a New York City broker with the Mackay Dixon Team at Douglas Elliman.

Asking price is not necessarily the price the home will eventually sell for — that final amount could be higher, or lower. Think of it as a starting point, the number stamped on a property listing to inform potential buyers how much the seller is ideally looking for to make a deal.

Asking price vs. listing price vs. selling price

All three of these terms are often used when discussing the price of a home, but they are not always interchangeable.

  • The asking price is the price that a home seller places on the listing when they put it up for sale. It is dependent on a number of factors, but it is effectively the amount of money that the seller is asking a buyer to pay.
  • Some people use the term listing price, or list price, in place of asking price. These terms are, in fact, interchangeable. “The asking price is the same as the listing price,” says Dixon. “It refers to the same figure as the asking price and it is determined the exact same way. Listing price just means it’s the price that appears on a property listing.”
  • However, a home’s selling price, or sale price, is not the same thing. The selling price refers to the final amount the home actually sells for. The selling price is dependent on how much a buyer is ultimately willing to pay, and how much the seller is willing to accept. It can be higher or lower than the listing price, depending on repairs needed, buyer competition, local market conditions and a number of other factors.

How sellers decide on an asking price

The asking price is typically determined jointly by the seller and their real estate agent. A number of factors go into the decision.

Primary among them is a comparative market analysis, or CMA, which is a thoroughly researched report put together by an agent who knows the local market well. A CMA looks at comparable homes in the area, taking into account details like number of bedrooms and bathrooms, lot size, square footage and geographic location. These “comps” provide useful points of comparison, helping to determine a home’s fair market value based on similar local sales.

Another worthwhile area to consider when determining an asking price is home improvements. If you have completed some value-enhancing renovation projects, like upgrading the windows or remodeling the kitchen, they will also contribute to how much the home is worth. For example, suppose a home in your neighborhood that’s very similar to yours sold last month for $300,000. However, your home also has a recently upgraded kitchen and a new roof. You and your agent may decide to list your home for $325,000 based on those added values.

The most accurate way to determine home value, though, is with a professional home appraisal. These are usually done by a buyer, as a condition of their financing, but they can be helpful to the seller in determining an asking price.

Is asking price negotiable?

An asking price is a starting point for the sale of a home, but it is not the end of the conversation. These prices are typically not set in stone — they can be, and often are, negotiated.

In some cases, the final selling price for a home may be lower than the asking price. This can occur if there are fewer offers than expected, for example, or if the home sat on the market for a while and the seller decided to lower the price to generate more interest.

Homes can also sell for higher than the asking price. For example, in a competitive market, multiple offers may drive up the sale price higher than the ask. In some cases, an agent may even choose to set the asking price deliberately low in order to spark a bidding war.

“A listing price might be higher than the final selling price because the seller wants room for negotiation,” Dixon says. “Or it might be lower than the eventual selling price because the seller wants to sell quickly and is offering at a lower price to bring in many buyers.”

Bottom line

An asking price, or listing price, is the amount that a seller lists their home for when they put it up for sale. It’s literally what they are asking a buyer to pay. But asking prices are negotiable and are often just a starting point — homes can sell for higher or lower than their asking price.