Should My Agent List Home Below Market Value?
by Vivian McDaniels | Jun 30, 2015
Having owned homes in New Jersey, New York and Tennessee, my husband and I have listed both our home in New Jersey and New York for under the market value. How low under the value depends on the circumstances. A real estate agent is familiar with the need to sell homes on a time-frame and the circumstance that make those time-frames work. There are a variety of situations that would warrant a real estate agent listing a home far below market value. Some of these scenarios can include:
Sellers can find themselves in situations where the home must be sold due to an inability to afford the mortgage or a pending divorce, an agent may recommend a short sale. A short sale is not only priced far below market value, it is also priced below mortgage balance. In New York alone, a short sale is often priced 31% less than the full value. The mortgage holder must agree to a short sale. The advantage in a short sale is that the mortgage holder is willing to accept less than what is owed on the home to settle the debt without seeking foreclosure. The disadvantage is that there will be no profit and the process can be lengthy.
In a seller’s market, homes may be hard to find and are in extreme demand. By pricing the home significantly lower than the actual value, the real estate agent is looking to stimulate quick and decisive interest in the property.
tretii2 | shutterstock.com
This interest could cause multiple offers and counter offers and result in the home selling above the market value. 2015 has already seen 7.4% rise to the median price. Advantage to seller: selling price beyond the home’s value –Disadvantage: Sudden drop in market and selling well below the value of the home.
There are many scenarios that fall into personal situations. Employment contracts can often change the location of work for some individuals. Real estate agents make not want to list the property well below the market value if they feel the property has potential on the market, knowing the time-frame that a seller helps an agent to determine the lowest listing price with the best profit. In our first scenario, we had 60 days; it clearly was not enough time in 2002 to sell a home in South Jersey.
Our Advantage: We had no mortgage and were not dependent on the sale to relocate. Disadvantage: Living in two places not feasible
Real Estate agents know their markets and the flow of buyers and sellers fairly well. While not everything is set in stone and can be predictable, there is always risk for the unknowns, you need to prepare for the good and bad. Go in with your eyes open and ask every question that you can think to ask. In the end, it is hard earned money in either scenario.
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