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During a "hot market" there is a certain marketing
technique which, though very effective, could cause trouble because of the way
the contract is written. This is the practice of "under-pricing" the home. In a
hot market, a home that is under-priced gets a lot of attention from other
Realtors, and they all start showing your home to their clients. Often, you get
into a situation where multiple offers are presented and the price starts going
up because of the frenzy. You end up selling the house above your asking price
and perhaps above what you could have received if you had priced it
traditionally.
However, the technique does have the potential to
backfire, so you should build safeguards to prevent having to pay a commission
"just in case."
You see, the listing contract usually states that if an
offer is received that meets the terms presented in the contract (including
price), the real estate agent has earned his or her commission â even if you
decide not to sell. A reputable agent would never attempt to collect a
commission if they were using the "under-pricing" technique and it backfired,
even if they are technically entitled to one. For that reason, in the
"additional terms" space on the listing contract, you should specify your true
target price â when the agent has really earned the commission.
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