Selling a House Under Market Value

Selling a house is usually considered a profit-generating activity — where sellers hope to recoup as much money as possible. So why would you consider selling property under its market value?

It might sound counterintuitive, but there are plenty of reasons selling your house below market value is sometimes the right financial strategy. Most often, this is when other transaction-related benefits outweigh the purchase price.

Whether you’re in a hurry to sell your home, facing financial hardship, or market conditions have made it the only option, there are a few things you should know when you sell a house under market value.

What is selling below market value?

A home’s market value is the price it would fetch in its market from a ready, willing and able buyer. Selling a house “below market value” just means that you discount your property below that amount. Keep in mind that a house’s market value may be different than appraised values and assessed values — appraised values are a result of the opinions of certified appraisers, while assessed values are delivered by municipal tax assessors.

To work out how much your home would sell for, you first need to estimate what price you would get for your home if it was in tip-top condition, then deduct the estimated costs of repairs. These can be steep: Home Advisor estimates that a typical home renovation can cost upwards of $20,000. That’s one of many reasons that selling below market could be a better financial option.

Reasons you may want to sell your house under market value

For a quick sale

One of the most common reasons to sell a house under market value is in the interest of selling the home faster. There are lots of reasons you might need to sell in a hurry — to free up equity for other expenses, expedite a move, resolve financial issues, or just get rid of a house. In these cases, being able to sell the house quickly and easily takes priority over profit.

For hard-to-sell homes

Some sellers already know that the house has major defects, and want to avoid the hassle of intensive repairs or negotiations — so they’ll sell a distressed house as-is, with the home’s condition factored into the purchase price. But physical distress isn’t the only thing that turns off buyers; you may also consider selling a house for less than market value if it has title flaws, past due taxes and fees, or code violations, for example.

For tough real estate markets

Best case scenario, you list your house for sale and receive a full-price offer right off the bat. But more often, the pricing and listing process can take months or years. If your home has been on the market for an extended period of time, if you’ve only received low offers, or if a poor inspection caused a deal to fall through, you might consider selling below market value to offload your property and move on. It’s the “bird in the hand” mentality.

Can you sell a house for less than it’s worth?

If the question is whether a seller can sell a house below market value, then the answer is yes. You can sell your house for any price a buyer agrees to pay for it, even if that price falls short of your home’s market value. However, there are a few considerations any seller should keep in mind.

Tax implications of selling a house below market value

When you sell your home for less than its market value, you may have to contend with taxes and unpaid loan balances. You also can’t take a deduction on the loss you agree to take when selling below market value. However, if you simply cannot afford to maintain your home, selling it for below market value provides you with a good alternative to foreclosure.

Closing costs to sell a house under market value

Any time you sell a home, you still have to pay closing costs, even if you’re selling for a low price. Closing costs can run 8% to 10% of the sale price and include things like property transfer fees, attorney fees, and escrow and title charges. (Fortunately, many of these fees are eliminated when you sell to a cash home buyer.)

Negative equity on homes less than market value

If the reason that you’re selling the property under market value is financial hardship or you’re just in need of some extra income, you could consider doing a short sale. This is where you sell the property for less than what you owe in mortgage. If you resort to this, keep in mind that an agreement with your mortgage lender must be completed, and there are cases that the lender might ask for proper documentation of hardship status.

Need to sell your house fast? Contact KM Home Buyers.

We buy houses throughout Hillsborough, Pinellas, Pasco, Hernando, Manatee, and Polk Counties and can have a no-obligation offer in your hand in as little as 24 hours. To learn more about selling your house under market value, give us a call today at 813-213-4884 or contact us online to request an offer.