Why might some real estate agents suggest starting with a lower asking price, and what are the potential benefits and risks of this strategy?
When you’re getting ready to sell, pricing your home feels like a high-stakes guessing game. You might naturally assume that starting high gives you room to negotiate down, right? So it can feel totally counterintuitive when a real estate agent suggests doing the exact opposite: pricing the home below market value.
It sounds risky—after all, you don’t want to leave money on the table. But experienced agents often suggest this as a deliberate psychological strategy, especially in competitive markets.
Let’s break down why agents use this tactic, along with the very real benefits and risks you need to weigh before saying yes.
Why Agents Suggest a Lower Asking Price
The main goal of underpricing isn’t to sell the house for less; it’s to manufacture a surge of urgency.
- Catching more eyes: Real estate search platforms use strict price filters (e.g., houses under $400k). If your home is worth $410k but listed at $389k, it suddenly pops up for thousands of buyers who would have otherwise scrolled right past it.
- Creating a crowd: A lower price creates the immediate impression of a great deal, bringing a flood of foot traffic through your open house all at once.
The Major Benefits of This Strategy
- The bidding war effect: When multiple buyers fall in love with the same property simultaneously, FOMO (fear of missing out) kicks in. Bidders often compete against each other, driving the final purchase price past what it would have originally been worth.
- A faster sale: Time is money when selling a house. A well-executed underpricing strategy often leads to multiple offers within the first weekend, drastically cutting down the days your home sits on the market.
The Real Risks to Keep in Mind
- The appraisal gap: Just because a buyer offers $450k on a $389k house doesn’t mean the bank’s appraiser will agree. If the appraisal comes in low, the buyer might scramble to cover the cash difference, or the deal could fall through.
- Backfiring completely: If the market is slow or buyers see through the strategy, you might attract lowball offers instead of a bidding war. You could end up stuck selling your home for less than its actual worth.
Ultimately, this strategy works best in balanced or seller’s markets where demand is high. It’s a bold move that requires a lot of trust in your agent’s read of local buyer behavior.