CA Real Estate License Exam 2025: Detailed Explanations (Q&A 637)

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CA Real Estate License Exam 2025: Detailed Explanations (Q&A )

Question 637: When an asking price is initially based on a listing contract, it will probably:
A. Have a high-end market value.
B. Have a low-end market value.
C. Have a mid-range market value.
D. Not reflect the sales of other properties in the same neighborhood.
Correct answer is (A). Have a high-end market value.
Sellers generally want to get the highest possible price for their property. Therefore, the initial asking price, often set in consultation with the listing agent, tends to be at the higher end of what the seller believes the market will bear. Setting a slightly higher initial price allows room for negotiation with potential buyers. Buyers often expect to offer less than the asking price, and a higher starting point accommodates this expectation. An initial high asking price can also serve to "test the market." It allows the seller and agent to gauge buyer interest and see if there are any offers at or near that price. If not, they can adjust the price later. While a good agent will advise on a realistic price based on market analysis, they also need to consider the seller's desires. Starting slightly high can keep the seller happy initially. While the ultimate goal is to reach a price within the fair market value range, the initial asking price as it's introduced to the market is strategically often set towards the higher end of that range. It's less common to start with a low-end price unless there's a specific strategy for generating multiple offers quickly or if the seller needs a fast sale. A mid-range price is possible but might not leave as much room for negotiation or capitalize on initial buyer enthusiasm. A price that doesn't reflect comparable sales would likely deter buyers and is generally not a sound strategy.

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