Final answer:
The parties to a listing agreement are the home seller and the real estate broker, not the buyer. Imperfect information can lead to difficulties in price negotiations between buyers and sellers because it affects market understanding and pricing expectations.
Step-by-step explanation:
The parties to a listing agreement are typically the home seller and the real estate broker. The seller grants the real estate broker the right to list the property for sale and to act as an agent in the sale of the property, often under the terms of an exclusive agreement. This allows the broker to advertise and work to find a buyer for the property on behalf of the seller. In this contractual relationship, the buyer is not a party to the listing agreement. Instead, the buyer becomes a party to the transaction once they make an offer on the property and enter into a separate purchase agreement.
It might be difficult for a buyer and seller to agree on a price when imperfect information exists because both parties might not have a clear understanding of the market conditions or the true value of the product. This can lead to a mismatch in price expectations, hindering the negotiation process. Key factors of a competitive market that impact pricing negotiations include the presence of many sellers and buyers, the offering of identical products, the level of market information and awareness among all participants, and ease of market entry and exit.