I was recently catching up on my ActiveRain newsletter reads (I'm behind) and it seems the hot topic a couple of weeks ago (okay, way behind) was agents "underpricing" listings in order to get buyers to make offers.  I tracked back a few posts and it seems that the start of this was a post concerning a short sale where it was priced way lower than the buyer's agent's perception of market value and because of that, there were over 20-30 offers on the property.

Here's the thing, and what, to me at least, comes across loud and clear in that post...there is no such thing as an "under-priced" property.  As long as a property is marketed well, open to the public and with enough time, a true market value price will be given as an offer on the property.  It doesn't matter what price it is listed.  You can read my post on selling secrets for more info on this.

I'm making an assumption here and I hate doing that, but as in many cases, you have to be able to draw some of your own conclusions...if this property has over 30 offers on it, it's a pretty safe bet that the price of the property as already shot up WAAAAY past whatever the listing price was, especially if it was some low price of 50% of market value or something, as was stated.

WHY?  Simple...the buyers making the offers understood it was "a deal," knew the "fair market value" of the property as it sat and made their offers on what they felt it was worth to them.  Folks, that's consumer driven pricing at it's finest.

So, what is all the rub about "under pricing" anyway, then?  Well, from my reads on it, it seems that some agents (especially buyer's agents) felt that anything that wasn't priced at "market value" was considered under priced.  Market value is simply what a person is willing to pay for that property on a particular day, at a particular time, nothing more.  Again, even if it were listed for a $1, the true "market value" would come out in the offer, assuming proper marketing and time on the market.

Other comments made mention that gross underpricing a property and then taking bids on it to generate a higher offer is nothing more than an auction.  I'm not going to get into semantics here, or try to explain the real differences, but if that's what the seller is wanting to do, and it works, so what?

One comment in particular caught my eye (sorry don't remember who made it).  A commenter said that if the goal was to simply find the person willing to bid the highest price, then every property should be listed for a dollar.  Here's why I think that is a GREAT idea.

So, what is under pricing anyway?  Well, it seems it's different depending on who you ask, but to me, and this was pointed out somewhere in the threads concerning under pricing as well, true "under pricing" is listing the property at a price that the seller would not, or could not ever actually sell the property for in the first place.  Now, the initial post was about a short sale.  Short sales tend to change the game on what a seller "could" sell for upfront since, by definition, the seller is offering the property for a price that he cannot actually sell it and is hoping that whatever price the buyer gives, his lender is willing to take.  So the question then becomes, does it really matter if it's offered at $100,000 or a $1 and taking bids?

On a "standard" sale (is there such a thing), listing a property at a price the seller would never accept could definitely have legal issues and could probably be defined as under pricing...or could it?  A simple way to solve this is FULL DISCLOSURE.  Just put in the listing something to the effect "this is a starting price only and the seller is taking bids until X date.  The highest and/or best offer will be accepted on that date.  If no acceptable bids are submitted, then seller is under no obligation to sell."  Of course, state laws concerning such will still apply, but in general, it works.  An old post of Broker Byrant's explains range pricing.

FINAL ANALYSIS:  The truth is, grossly under pricing a property can have as much of a negative impact as grossly over pricing a property.  I wouldn't recommend either if your goal, as a seller, is to get the most out of your house in the least amount of time.  This post is to simply show that there are always two sides to every story and that, as agents, we need to get over the "it's under priced" junk and simply do our jobs to the best of our ability, which include understanding when a property is priced a certain way and educating our clients on the how's and why's of such and following through.  Your thoughts?