Gross Sales Price
Definition of "Gross Sales Price"
The definition of gross sales price in real estate refers to the combined cost of a property or listing before subtracting the real estate agent’s commission, sales tax and other auxiliary fees. In short, it is the price, in its entirety, that the buyer must pay in order to purchase the property. This differs from net sales price, the amount that the seller takes away from the transaction.
In the following section, we will provide an example of the use of gross sales price as opposed to net sales price.
Example of gross sales price
Steve is an ambitious real estate investor who makes his living flipping homes on the housing market of several cities around the country. With nearly a decade of experience, Steve has little difficulty making a tidy profit off of each home he invests in. Upon finding a run down but structurally sound two story home for sale in a rapidly growing neighborhood, Steve doesn’t hesitate to quickly snatch it up.
However, bad fortune awaits Steve in his home flipping enterprises. With a severe market downturn occurring almost overnight in the area the home is located in, the value of the home plummets before it is fully renovated and prepared for sale. Desperately trying to break even, Steve does everything possible to expedite the renovation process and posts it for sale as soon as it is complete.
Market downturn notwithstanding, Steve is able to find a buyer willing to pay an amount that would seemingly allow Steve to break even. However, being an experienced real estate investor, Steve is painfully aware of the difference between net sales price and gross sales price.
With the housing market in a slump, Steve is forced to sustain a net loss on his investment, after all the auxiliary costs contributing to the gross sales price are subtracted from the amount paid by the buyer. This is an example of gross sales price in real estate.
Popular Real Estate Terms
Inverted gable roof design where the two side slope upward from the center to the eaves with a valley in the middle. The roof resembles the wings of a butterfly, hence, the name. ...
Deed used to convey property back to the original property owner. Normally a reconveyance deed is issued upon the satisfaction of a property's mortgage. ...
Law enacted by a local authority applicable to the action of people or things. An example is a fine of $5,000 for littering vacant real estate. ...
Generic name given for any association of property owners sharing an interest in commonly owned property. Community associations may be developed in condominium, cooperative, or housing ...
Gentrification is an urban development phenomenon wherein a specific area changes its population profile by way of an economic appreciation of its real estate. The best way to understand ...
Funds that are retained in an account until a certain event occurs. For example, a downpayment on a contract held until full payment is received whereupon the holding funds are credited to ...
The largest financial intermediaries directly involved in the financing of real estate. Commercial banks act as lenders for a multitude of loans. While they occasionally provide financing ...
Using beams on an interim basis while a structure is being built. Reinforcing a building with supports. A property. ...
All the costs involved in constructing a development project including the cost of acquiring a parcel of land, paying for contractors labor, materials as well as taxes and development loan ...
Have a question or comment?
We're here to help.