Should You Ever Sell Your House Below Market Value?
Have You Ever Asked Yourself, Should I Sell Below Market Value?
It may seem illogical, but selling your house below market value can be a good strategy. There are a number of reasons why it makes sense to at least consider the option.
1. Selling a house to a family member below market value
Parents selling to their children is one common example of when the option makes sense. You have to make sure the sale is a legal transaction though. It’s a good idea to hire a real estate attorney to draw up the paperwork and record the transaction.
Be sure you understand all the tax implications before selling a house to a family member below market value. If you sell at 25% or more below market, the IRS will view the transaction as a gift, and your relative may end up paying a gift tax on the amount you discounted.
2. Financial hardship
Times are tough. If you need cash to get through them and are lucky enough to have some equity in your house, you might consider selling. The profits from the transaction could tie you over until you get another job or are back working full time. Selling your house yourself instead of involving a real estate agent means you don’t have to pay commissions and can offer your house at a lower price.
This is certainly a better solution than allowing your home to go into foreclosure. If you do that, you won’t get any money, you will be without a home; furthermore, the foreclosure will negatively impact your credit for seven years.
3. No market activity
If real estate isn’t selling, and your house has been on the market for months with little or no activity, the option to sell your house below market value will probably begin to look more attractive.
Before you take this step though, you should make sure the house is priced competitively in the first place. If you determine the price is higher than comparable houses on the market, reducing the price might get you more foot traffic.
4. Quick sale
You may need to move your house quickly because you’re relocating for a new job, have bought another house, or are building a new house and can’t afford two house payments. In these instances, selling your house below market value could be beneficial.
You will probably want to sell the property “as is” so you don’t spend money on costly repairs. If the repairs are major, and you doubt banks will lend a potential homebuyer the money without the repairs being made, consider marketing to cash buyers.
There are companies that buy houses “as is” to fix up and resell. They might be interested in yours. No matter what your situation, if you’re ready to sell and need cash fast, give us a call. We’ll be happy to give you a fair, competitive, no-obligation quote.