Can You Sell a House For Less Than Its Value?
- Published on
- 8 min read
-
Richard Haddad Executive EditorClose
Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
The roads leading to — and away from — homeownership don’t always follow the routes we planned. You may be facing a life change that has you wondering, “Can you sell a house for less than its value?”
While the ideal scenario is to receive offers that match or even exceed your property’s worth, there are various reasons why you might consider pricing or selling a home below its market value.
In this easy-scan guide, we’ll explore why homeowners might choose a new route and discuss some practical steps to navigate a below-market-value sale.
Start By Requesting an 'As Is' Cash Offer
We’ll compare your offer side-by-side with an estimation of what you could fetch on the open market so you can make an informed decision.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial or legal advice. HomeLight always encourages you to reach out to an advisor regarding your own situation.
Can you sell a house for less than its value?
Yes, it’s possible to sell a house for less than its market value. Homeowners often choose this approach due to specific financial needs, personal obligations, or home or market conditions that limit higher offers. Whether it’s about expediting a sale or addressing urgent financial demands, selling below market value can offer advantages for certain sellers.
However, this decision involves weighing various pros and cons, understanding tax implications, and considering other potential impacts. As we dive into the reasons behind this choice, keep in mind that every situation is unique and should be carefully evaluated.
Reasons to sell a house for less than its value
There are many reasons why a seller might decide to part with a property below its appraised or market value. For some, the decision stems from a personal relationship, while others face financial pressures that necessitate a quick or lower-priced sale. Here are some common scenarios where selling a home below market might make sense:
1. You’re selling to a family member or friend
Selling a property to a family member or friend can streamline the process and help you save on certain costs. Often, sellers are willing to lower the price to make homeownership more affordable for their loved ones. By reducing the price, you may also avoid back-and-forth negotiations or complicated financing arrangements, which can make the transaction smoother for both parties.
2. You’re only receiving low offers on the open market
When the local market is slow, or your property isn’t generating the interest you’d hoped, you may only receive offers that fall below your asking price. Rather than holding out for an ideal offer that may not materialize, accepting a lower offer might be a pragmatic choice, especially if waiting longer isn’t an option due to the availability window of your new home.
3. You need a quick sale through a low listing price
If you’re working with a tight timeline — whether due to a job relocation, a change in personal circumstances, or a desire to avoid showings and open houses — pricing your home below market can speed up the sale. In most cases, lower-priced homes attract more buyers, which can help you sell faster and move on to the next chapter.
4. Your home requires costly repairs you can’t afford
Homes that need major repairs or updates may struggle to sell at market value, as buyers are often wary of properties requiring extensive work. By pricing the home lower and selling as-is, you acknowledge the investment that the buyer will need to make, which can attract buyers looking for fixer-uppers or investors interested in renovation projects.
5. You are facing a financial hardship or underwater equity
For homeowners in financial distress or who owe more on their mortgage than the property’s value, selling below market might provide a way out. This approach can prevent foreclosure and help you alleviate financial strain, even if it means walking away with less than anticipated.
6. You inherited a property you can’t or don’t want to maintain
Inheriting a property can be a blessing, but it also comes with responsibilities. If you’re not in a position to maintain the home or simply prefer to liquidate it quickly, selling at a lower price can provide a straightforward exit without prolonged upkeep or added financial burdens. This reason is especially common when the inherited home is located out of state.
How much is your home worth now: If you’re not certain how much your home might be worth, try HomeLight’s Home Value Estimator. Answer seven simple questions to receive a ballpark estimate of what your home is worth today and explore your selling options.
Tax implications of selling a house for less than its value
Selling a home below its market value can lead to specific tax implications, depending on the type of sale, the relationship between buyer and seller, and the overall financial outcome. Here are a few tax-related factors to consider:
Capital gains tax
If the home is your primary residence and you’ve owned it for at least two years, you may qualify for a capital gains exclusion, allowing you to avoid taxes on a certain amount of the profit. However, if you’re selling at a loss or only breaking even, capital gains tax won’t apply. For second homes or investment properties, you won’t have the same exclusion and may need to report the sale on your tax return.
Gift tax for discounted sales to family members
Selling to a family member at a significant discount could trigger gift tax considerations. If you sell for less than fair market value, the IRS might treat the difference as a “gift.” While gift tax exclusions cover some portion of the discounted value, it’s essential to consult a tax professional to understand your potential liability.
Tax deduction opportunities
If you sell at a loss on an investment property (not a primary residence), you may be eligible to claim a capital loss on your taxes. This deduction could help offset other gains, providing some relief if the sale leads to a financial loss.
Other considerations if you sell a house for less than its value
Selling below market value doesn’t eliminate the standard closing responsibilities or other potential complications. Here are some factors that sellers should keep in mind:
You’ll still have closing costs
Regardless of your home’s sale price, closing costs remain a part of the transaction. Sellers typically cover costs like agent commissions, title insurance, and escrow fees. Depending on local norms and the specifics of your sale agreement, you may be able to negotiate certain fees, but it’s wise to budget for closing costs even when selling at a discount. Try HomeLight’s Closing Cost Calculator to get a better handle on what to expect.
There may be legal considerations
Selling for less than market value may lead to legal complications, especially if family members are involved or if the buyer is receiving a significant discount. In some cases, sellers or buyers may need to document the transaction carefully to avoid misunderstandings or disputes. Consulting with a real estate attorney or financial advisor can help ensure that the sale is handled properly and legally, reducing the risk of issues after the sale closes.
Market value vs. appraised value vs. assessed value
It’s essential to understand the distinctions between different property values when pricing your home below market. The market value reflects what buyers are willing to pay based on current demand, while the appraised value is determined by a professional assessment and is often used for financing purposes. The assessed value, calculated by local tax authorities, primarily impacts property taxes. When setting a price, it helps to be aware of these differences, as a discounted price may not align with an appraised or assessed value, affecting everything from loan eligibility to tax obligations.
Find a Top Agent to Sell Your Home for More
Tell us a little about your home and selling needs and we’ll provide recommendations for up to three top real estate agents in your area.
Options to sell a house for less than its value
If you’re considering selling below market value, several methods can help you find the right buyer and streamline the process. Here are some common approaches to explore:
Traditional agent-assisted sale
Listing with a real estate agent remains one of the most straightforward ways to sell, even if you plan to price the home below market. An agent can help you set a competitive price, market the property effectively, and negotiate with buyers. By working with a professional, you are more likely to receive offers closer to your target price, even with a discounted listing.
Short sale
If you owe more on your mortgage than the home’s value, a short sale could provide a way to offload the property without facing foreclosure. In a short sale, your lender agrees to accept less than what’s owed on the mortgage, allowing you to sell the home for its current market value. While a short sale can impact your credit, it’s typically less damaging than foreclosure and may offer a solution if you’re struggling to keep up with mortgage payments.
Auction sale
Selling a home at auction is a fast method that often appeals to sellers who need a guaranteed, timely sale. While the price you receive at auction can vary widely, it’s a viable option if you’re willing to accept a range of offers. Auctions can attract both investors and individual buyers looking for discounted properties, and many auctions offer reserve pricing, ensuring you don’t sell below a minimum amount. However, there are some risks. Be certain you research the pros and cons of selling a house at auction.
Sell to a cash buyer
Selling directly to a cash buyer can expedite the process and eliminate many of the hurdles associated with traditional financing. Cash buyers, including professional home-buying companies, often purchase properties as-is, making them ideal for homes in need of repairs or rapid sale.
If you are considering this option, HomeLight’s Simple Sale platform can connect with the largest network of trusted cash buyers in the country. You can receive a no-obligation cash offset in 24 hours and close in as little as 10 days. Get started by answering a few questions about your home and selling timeline.
This option allows you to avoid repairs, showings, and lengthy negotiations, closing the sale on your timeline.
Tips to avoid foreclosure
If you’re worried about foreclosure, there are steps you can take to help protect your financial health. Here are some proactive options:
- Explore mortgage forbearance or loan modification options – Many lenders offer forbearance plans or modifications that can reduce or temporarily pause payments.
- Seek help from a housing counselor – A HUD-approved housing counselor can offer free or low-cost advice tailored to your situation.
- Consider a refinance or reverse mortgage (if eligible) – If you have significant equity, refinancing or a reverse mortgage could provide relief, especially for senior homeowners.
- Request a short sale or deed in lieu of foreclosure – These alternatives can allow you to sell or transfer ownership back to the lender without foreclosure.
- Prioritize communication with your lender – Staying in touch with your lender can open up options and keep the door open for possible solutions.
Consult with a top local real estate agent
If you’re contemplating a below-market sale, partnering with an experienced real estate agent can make a significant difference. A top agent can provide insights into your local market, recommend the best selling strategy, and guide you through pricing, paperwork, and negotiations.
Whether you’re looking to minimize financial losses or achieve a fast sale, an agent can be an invaluable resource as you make informed decisions tailored to your situation. To find a top-rated agent in your city, use HomeLight’s free Agent Match tool. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
Header Image Source: (lmphot/ Depositphotos)
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
