Working in a Hot Market
"Hot Market" Under-Pricing Sales Technique
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 Real Estate Professionals, 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 into the listing agreement 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 – even if you decide not to sell. A reputable agent would not attempt to collect a commission if they were using the "under-pricing" technique and it backfired, even if they are technically entitled to one. But, to avoid confusion, it would be advisable to specify your true target price in the "additional terms" space on the listing contract to identify when the agent has earned a commission.