Definition
The agreed-upon amount you will pay for a property, stated in your purchase contract. Purchase price is the basis for calculating down payment, loan amount, and closing costs.
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The purchase price is negotiated between buyer and seller, often involving multiple counteroffers before agreement is reached. It should be based on comparable sales analysis, property condition, market conditions, and both parties' motivations. The purchase price determines the buyer's equity from day one—the difference between what the property is worth and what the buyer paid.
Pro Tip
Purchase price is just one aspect of the offer. Terms like inspection period and contingencies can be equally important.
Example
A home is listed for $400,000; the buyer offers $385,000; the seller counters at $395,000; the buyer accepts the counteroffer, establishing a purchase price of $395,000.