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Should I List My Home Under Market Value?
When you decide to sell your home, one of the first conversations you should have with a real estate professional is about the strategy to market your property. There are risks and potential benefits to every marketing approach, and your real estate professional should outline these for you.
One of the more controversial marketing tools in an active market is to price the property below the market value in hopes of attracting buyers who will compete for the property, driving the price higher. Sellers in these cases usually have no intention of accepting offers that are below the market value for the property.
While it is legal for you as a homeowner to list your property below market value, it can lead to unwanted outcomes that could ultimately make it more difficult to sell your home, and even end up costing you money.
Risk: No Over List Offers
Even in an active market, not every property is going to attract multiple offers. Some properties may be less desirable because of their location, age, condition, or other factors. Despite being priced below market value, your property may only get offers below your list price.
If you advise the buyers that you will only consider offers above the listing price, those buyers may choose not to rewrite their offer, believing that the marketing for the property was misleading. If this happens you may need to increase your listing price to reflect what you are willing to accept or cancel the listing and relist your property at a higher price. This can take valuable time and result in added paperwork.
Risk: Stigmatizing Your Property
Listing your property below market value with the intention of creating a bidding war may also create a stigma or negative perception of your property. Buyers may wonder why your property is listed below what it is worth. They may assume that there is something significantly wrong with it. This may result in buyers deciding not to make an offer on your property.
Buyers who recognize the strategy of under-pricing to encourage competition may also choose to avoid your listing. Buyers who consider the pricing strategy misleading may fear that sellers who use the strategy could attempt to mislead them in other areas of the transaction.
Risk: Liable for Commission
You do not have to accept any of the offers you receive for your property, even if you get an offer that meets your asking price. But keep in mind that your service agreement (listing contract) between you and your agent may require you to pay the commission if you receive a full-price offer, even if you do not accept it. It is important that you understand all the terms of your contract and the financial implications of your marketing decisions and pricing strategy.
Every decision you make can impact the sale of your property. Whether you are determining the best time to list your property, how to market it effectively, which offer to accept or counter, each choice will present benefits and risks to consider. Only when you understand them can you make a fully informed decision that is best for you.
Questions?
BCFSA’s Practice Standards Advisors are available to answer questions about real estate transactions and the services to expect from a licensed real estate professional. Get in touch with us, at [email protected].
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