Can I Sell a House Below Market Value

Selling a property is generally done to generate profit. Home sellers expect to gain some kind of revenue, hopefully more than what they have already invested on it. However, there are also cases in which sellers decide to bite the bullet and sell the property below market value.

For example, they may want to dispose of the house or sell it as fast as they can. Selling it at a more accessible price tends to convince buyers to move faster. Or the sellers may decide to sell it to a family member, in which case, a discount may be in order and the property’s fair market value is seldom prioritised for consideration in pricing. 

If the question is whether a seller can sell a house below market value, then the answer is yes. However, as with any real estate transactions, there are considerations, benefits and disadvantages to this which all depend on the seller’s situation and objectives for sales.

There are a lot of factors involved in valuing a property of course. Factors such as inflation and housing bubbles can affect how much you get from the home you are selling. Oftentimes, keeping up with the pricing index may help.

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Some Reasons You May Want To Sell Your House Under Market Value

  1. Competition

As a seller, you are under real pressure when pricing your property. You consider the speed of the sale, your potential profits and especially your competition. In such cases, it is natural to think that reducing the property’s price might expedite the sale.

  1. Disposal

As with the above, those who want to dispose of their properties fast tend to lower the price. These people may include those who want to move, are having financial issues or just want to get rid of a house. In most cases like this, sellers just want to complete the sale fast, whether or not they actually want profit or not.

  1. Undesirable property performance

Another case is when the seller has already listed the house on the market, and it is not performing well, they may decide to sweeten the deal up a bit to swing the interest to their favour.

  1. For the family

If you’re looking to sell the house to a family member, especially to your children, of course you want to give them a discount. Such is expected. In which case, you value the property way lower than expected. This is perfectly legal, but it is not without drawbacks.

Things to consider

When selling a house below market value, there are added considerations that the seller should carefully weigh up. This may range from simple factors to legal matters.

  1. Taxes

It would be wise for you as a seller to get acquainted with relevant tax laws and legislations that cover these matters such as capital gains tax, gift tax and inheritance tax. This is to avoid any possible legal and financial ramifications when conducting the sale.

  1. Proper valuation

If the problem is the listing’s poor performance, consider the possibility that the property is incorrectly valued.. Houses that are of different home value types differ in price range. Maybe you need to reevaluate how much your property really is worth.

Also, keep in mind that appraised value is different from assessed value. Appraised value is provided by appraisers and assessed value is provided by tax assessors. You need to consider both these values in putting a price tag on your property.

The poor performance of your listing could also be a result of the fluctuations in the housing market. The stronger the market is, the faster your property will sell in spite of improper valuation. In which case, it may be wise to sell it at full market price. However, in slower markets, prices can drastically affect the buyer’s decisions. This is where you can consider making it more affordable, or should we say, “competitive.”

  1. Negative Equity

If the reason that you’re selling the property is financial hardship or you’re just in need of some extra income, consider doing a short sale. This is where you sell the property for less than what you owe in mortgage. 

While short sales are much less common in the UK, it is not unheard of. If you resort to this, keep in mind that an agreement with your mortgage lender must be completed. Of course it does not come very easy.

There are cases that the lender might ask for proper documentation of hardship status or that you may not be able to get it approved by the bank. As with any transaction, you need to make sure that the agreement is put in paper and appropriate contracts are signed to avoid any future troubles.

  1. Consult a professional

There is, of course, a way to ensure that you are able to complete such complex transactions as selling a house under the market value, and that’s to confer with a trusted agent. There are tons of options out there, no matter what your situation as a seller is. A good and proper agent can provide you these options and help you decide which route to take. After all, things such as short sales may not always be the best way to go.

These considerations and reasons for underpricing a property are not exhaustive. These are merely the most common. If you are in need of further assistance, don’t hesitate to contact us at 0191 486 2386!

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