Purchase Price
The purchase price is the total amount of money a buyer agrees to pay for a property, as specified in the purchase agreement. This figure represents the negotiated value between buyer and seller and forms the basis for calculating various transaction costs and financing needs.
Example
“The purchase price of $525,000 was slightly below the asking price after negotiations over needed roof repairs.”
Memory Tip
It's the 'PRICE you PAY to PURCHASE' - the bottom line dollar amount on the deal.
Why It Matters
The purchase price determines your loan amount, down payment requirements, closing costs, and property taxes. It also affects your home's loan-to-value ratio, which impacts interest rates and mortgage insurance requirements.
Common Misconception
Many buyers think the purchase price is the total amount they'll pay, but it doesn't include closing costs, inspections, or other transaction expenses.
In Practice
If you agree to a purchase price of $400,000, you'll need to secure financing for this amount minus your down payment, but you'll also pay additional costs like $8,000-$12,000 in closing costs that aren't part of the purchase price.
Etymology
From Old French 'pris' (value, worth) combined with 'purchase,' originally meaning 'the worth of what is acquired' in medieval commerce.
Common Misspellings
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