What does Listing, sales & appraisal price have in common with shoes?

By
Managing Real Estate Broker with Jody Keating Connective Realty,LLC, Bryan/College Station,TX

What is the difference between the Listing Price, the Sales Price and the Appraised Value of a house and why do all three prices matter?

First some quick definitions:

Listing Price is how much money the seller wants for the house.

Sales Price is the amount of money that both the seller and the buyer eventually agree too.

Appraisal Value is how much the lenders appraiser says the house is worth.

These are very simplified definitions and there are some other factors that come into play but let me give you an example so that you can see the general difference between all the prices.

Scenario:

A husband decides to buy his wife a pair of shoes. (I know, I know....... remember, this is just a scenario). He has a rough idea of how much money he wants to spend on them and he knows what color and style she likes. (Remember..... scenario!!)

He finds the perfect pair in exactly the right size and decides that these are the ones she will love the most, anyway he's getting tired of shoe shopping.

However, there's a problem, they are too expensive. The Listing Price is more than he's willing to pay for the shoes so he decides to haggle with the person that's selling them. After going back and forth on the price and with the seller agreeing to throw in free gift wrapping, both the husband and seller agree to a Sales Price.

shoes 3Happy with himself and proud of his shoe shopping prowess and the great price he paid for them, he brings the beautifully wrapped gift home to his wife. Thrilled to receive the gift she opens the package and immediately loves them. Very happy with himself, her husband then tells her of his great negotiating skills and what a deal in price he made.

Shocked at how much he paid for them, she tells him that she bought  another pair of shoes last week and they cost much less. In her experienced shoe shopping eye, she estimated that he paid well above the Appraised Value, since she knows she can get them even cheaper at the 50% off sale.

She then..... gasp, wait for it........ tells him he has to return the shoes because they cannot afford them at that price.

See, I told you this was just a scenario!!!!

And there you have it..... The difference between Listing Price, Sales Price and Appraised Value all tied up in a gift wrapped box.

All of it is true, except the parts where the husband volunteered to go women's shoe shopping, knew what shoes to buy, paid too much for them and the biggest lie of all....... the wife telling him that they are too expensive and they need to be returned to the store.

Otherwise, true story!!!

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Dale Taylor 06/09/2015 08:01 AM
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Rainmaker
1,431,914
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Jody, you do live in a fantasy world.  I lost a contest on Valentines day because I did not know my wife's shoe size.    (as a wise man I guessed really small.)

Jun 08, 2015 03:32 AM #30
Rainer
19,576
Rose O'Reilly Sievers,CRS,SRES
Carlsbad, CA

Jody:  very funny, great story.  We need this on a Monday morning, in order to face our crazy business.

Jun 08, 2015 03:51 AM #31
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

That is funny story, true or not. I buy most of my shoes online. Future of real estate? 

Jun 08, 2015 04:20 AM #32
Rainer
518,794
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

I've never bought shoes for my wife and quit buying anything personal years ago.

Jun 08, 2015 05:35 AM #33
Rainmaker
810,313
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

First of all, where is that husband?  I want him.  My husband would never think of buying me shoes.  A new broom, yes.  Shoes, no.  But your scenario does show clearly what asking price, sales price and appraised value are.

Jun 08, 2015 06:45 AM #34
Ambassador
1,558,159
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

What a clever way to get the point across about the differences. Nice...and of course, we keep the shoes. 

Jun 08, 2015 09:27 AM #35
Rainmaker
699,822
Bill Reddington
Re/max By The Sea - Destin, FL
Destin Florida Real Estate

The only issue I have is the 50% off days. They are gone. Here anyway. Have lots of buyers waiting for those days. Nice analogy!

Jun 08, 2015 12:55 PM #36
Rainer
112,897
Vera Gonzalez
RE/MAX Suburban, Inc. - Sterling Heights, MI
Gonzo For Real Estate

Love , love, love this analogy!!!

Jun 08, 2015 11:14 PM #37
Rainer
117,605
Bill Morrow
Keller Williams of Central PA - Mechanicsburg, PA
Bill Morrow, Associate Broker

You are after my heart. I love using analogies to explain things. I am sharing this with some of the new agents that I work with, as well as sellers.

Jun 08, 2015 11:40 PM #38
Rainer
177,228
Cheryl Dukes . . . . . Intown Atlanta
Solid Source Realty, Inc. - Atlanta, GA

Since we're having fun today, I love the shoes by Micheal Antonio.  But I'll bet they hurt your feet. I think the husband liked the shoes so much that he wanted his wife to have them. Even if the appraised value was less than the negotiated price, he was willing to fork over the difference.

Jun 08, 2015 11:54 PM #39
Rainmaker
393,357
Dana Hollish Hill
Hollish Hill Group, JPAR Metro Living - Bethesda, MD
REALTOR and Productivity Coach

Well you had me at shoes :) Great little fairy tale for the morning. Now I'm dreaming of new shoes. 

I think Lisa Velenovsky will like this post :)

Jun 08, 2015 11:59 PM #40
Rainmaker
592,684
Nathan Gesner
American West Realty and Management - Cody, WY
Broker / Property Manager

This is a great use of every-day life to clarify something that might be confusing to a client. Thanks for sharing!

Jun 09, 2015 12:51 AM #41
Rainer
292,121
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

Let's just simplify this a bit. If you are buying something with financing then value is most important. Regarding Real Estate, the appraisal is what the lender cares about not comparables from a Realtor, you know what I am talking about...

Jun 09, 2015 01:10 AM #42
Rainmaker
416,574
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
MC Dwyer-Santa Cruz Mountains Property Specialist

Very cute analolgy.    You're right - if they fit, the wife probably didn't ask him to return the shoes 

Jun 09, 2015 04:47 AM #43
Rainmaker
1,280,298
Donna Foerster
HomeSmart Realty Group - Parker, CO
Metro Denver Real Estate Assistant

Very clever analysis Jody! I can't even get my husband to go shoe shopping for himself!

Jun 09, 2015 04:53 AM #44
Rainmaker
1,640,895
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

And in your next career, you're going to write fairy tales!

Seriously, my husband did buy me shoes once. Not pretty shoes, but practical, and ones he knew I could/would use. 

Great analogy, by the way! 

Jun 09, 2015 06:39 AM #45
Anonymous
Margie Pacheco

Great Analogy! Will use this with clients.

Jun 09, 2015 07:58 AM #46
Rainer
4,238
Margie Pacheco
Coldwell Banker - Ellicott City, MD
Empowering Sellers-Buyers to Make Their Best Moves

Great Analogy! Will use this with clients.

Jun 09, 2015 08:05 AM #47
Rainmaker
238,276
Dale Taylor
Re/Max 10 New Lenox Illinois - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

Like your story so much I reblogged it from another perspective.  Great idea for a post.  Thanks

Jun 09, 2015 08:05 AM #48
Rainer
102,789
Doug Cook
Coldwell Banker Brown Realtors - O'Fallon, IL
Better Service, Better RESULTS!

My wife would have kept the shoes and made me go dress shopping with her for something to match...of course, all the while, she would constantly remind me that I overpaid...ha!

Sep 15, 2015 04:25 AM #49
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Rainer
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Jody Keating

Broker/MM/Realtor, Bryan / College Station, TX
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