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Should You Underprice Your Home to Induce a Bidding War?

Despite the ongoing housing market slowdown, bidding wars still occur. Dana Koch, a real estate agent with the Corcoran Group in Palm Beach, Florida, received three offers on the same day in February for his $14 million listing.

“It was just chance that those offers came in all at once,” Mr. Koch said. “Renovations on the house were finished a few weeks before we got those offers, but it had been on the market while it was under renovation without an offer at all.”

One thing Mr. Koch and his sellers didn’t do was set the listing price below their estimated market value, a strategy that some sellers and agents use to encourage multiple offers. The theory is that a below-market price will energize buyers to compete, resulting in a higher sales price.

While many real estate agents recommend this strategy, some say they never suggest it to any seller under any circumstances.

“In my 36 years in real estate, I’ve never recommended that someone purposely underprice a listing to ignite a bidding war,” said Corey Burr, a real estate agent and senior vice president with TTR Sotheby’s International Realty in Washington, D.C. “I always recommend that sellers price their home according to comparable sales. If that brings in multiple offers, so be it.”

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