What Happens When You Underprice Your Home When Selling?

There’s a myth that refuses to die: price low, spark a bidding frenzy, profit wildly. Tempting? Sure. But the data in this episode tells a more grounded story—especially in a blazing seller’s market where the crowd usually course-corrects mispriced homes in a hurry (picture shoppers sprinting down the aisle the moment a tag looks wrong).

What Happens When You Underprice Your Home When Selling?

When yoy underprice your home: The episode revisits a theme from a prior analysis on overpricing (spoiler: it hurts). This time, the spotlight is on underpricing and whether it truly juices the final sale price—or just your stress levels (and shoe leather from constant showings).

Quick context on the previous finding (the “don’t do this” baseline)

When sellers overprice, the earlier analysis showed two consistent penalties:

• About two extra months on the market, and

• Roughly $12 per square foot less than peers—on average—by the time the dust settled.

Two months of carrying costs plus a five-figure value haircut on a 2,000 sq. ft. home? That’s a hard no.

The Market Backdrop (Why Timing Matters)

The underpricing study covered the last six months—a period described as a seller's market with months of inventory dipping into the high 1s/low 2s. Translation: ultra-tight supply, fast movement, and frequent bidding scuffles. The host fully admits this climate can skew in favor of sellers, and expects some cooling later (still a seller’s market, just less “elbows out” at showings). In short: read these findings with the heat level in mind. (Think cast-iron skillet, not slow cooker.)

Methodology (Nerdy—But Essential)

To keep apples with apples, the analysis:

• Looked within subdivisions only. Urban edges can shift value block-to-block; subdivisions reduce that noise.

• Required ≥ 4 sales in each subdivision during the six-month window, for a basic sample size.

• Excluded outliers:

  • Sales > $1,000,000 (luxury behaves differently),

  • A few downtown “subdivision” labels that aren’t really subdivisions and routinely distort comps.

• Defined “underpriced” as homes that eventually sold for $15,000+ over the list. Why $15K? In this hot market, $5K–$10K over could just be normal bidding activity; $15K+ suggests the list was notably light.

(If your inner analyst just smiled, same.)

The Findings (Less Sizzle, More Signal)

On average, underpriced homes sold for roughly $3.33 per square foot more than the surrounding field.

Median lift? About $1.25–$1.45 per square foot.

Read that again. In a fire-hot market, underpricing didn’t produce a moonshot. It produced a small edge that hovers near the margin of error—and only half the sample even beat the field at all. In other words, sometimes the crowd bids you back to “about right,” and sometimes it doesn’t (cue the sound of a balloon deflating softly).

What the split looked like

• Roughly half of the underpriced homes outperformed their subdivisions,

• Roughly half underperformed or landed about even.

That’s not the slam dunk many expect from “price low and let ‘em fight.” It’s more of a coin flip with a slight lean.

Why the “Edge” Isn’t Bigger

In this climate, the market is incredibly efficient at detecting value gaps. If a home is obviously light on price, buyers show up—and quickly—and the bidding mechanism tends to normalize the final number near fair value. The data suggests the crowd is doing the appraiser’s job in real time (only louder, and with more text alerts).

The Hidden Cost of Underpricing: Chaos

Even if a slight average lift exists, the human cost to the seller is real:

• Showings upon showings (good luck keeping the house museum-ready),

• A mountain of offers, many of them easy passes,

• Time- and energy-intensive sorting to separate serious from shiny.

If you can sell for about the same without the stampede, why invite the stampede? (Unless you love scheduling your life around strangers’ footwear.)

“If I Underprice, How Much Is ‘Worth It’?”

The data hints at this: underpricing a little (e.g., ~$5K) often doesn’t light the fuse. Underpricing decisively is more likely to pull eyes and offers. But the study still doesn’t show a consistent, material outperformance that justifies the circus—especially compared with the clean, calm, and effective path of pricing at value.

Call it the Goldilocks rule of pricing: not too high, not artificially low—just right.

The Sensible Play in a Sellers Market

1. Price to value using a tight range. The host typically pins a $10K–$15K band based on comps, then watches active competition to anchor the final list.

2. Expect “about right” results. In this market, homes commonly sell for >98% of list—a sign that fair pricing gets you home, fast.

3. Avoid the penalty box. Overpricing = longer days on market and meaningful dollars left behind. That’s the one consistent mistake the data warns against—loudly.

4. If you underprice by accident, the market may fix it. Encouragingly, the crowd often bids an underpriced home back near fair value. It’s a nice safety net, not a strategy.

What Buyers Should Infer (So You Don’t Lose the House You Love)

• Multiple offers are normal right now. Plan like it.

• Speed and clarity matter. Clean terms, strong presentation, and knowing your ceiling beat “vibes” every time.

• Understand that if a home looks underpriced, others see it too (you’re not the only detective in the room).

(Yes, it’s frustrating. Also, yes, preparation wins.)

The Bottom Line on Underpricing vs. Overpricing

• Overpricing hurts—consistently—with longer time on market and a significant price penalty per square foot.

• Underpricing might yield a small average bump in this ultra-tight market, but results are mixed and often land near fair value anyway, while piling on stress.

• Best practice: Price it right. The current market will deliver traffic and strong results without theatrics.

(Think of pricing like bowling with bumpers: the best path is still right down the middle.)

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Bottom Line

What happens when you underprice your home when selling? In a white-hot seller's market, the crowd often bids it back to roughly where it belongs—yielding only a modest edge on average, and sometimes no edge at all. Meanwhile, overpricing reliably backfires. The simplest, strongest move remains the most boring: price at value, let the market work, and keep your sanity. (Your floors—and your calendar—will thank you.)

Ien Araneta

Journal & Podcast Editor | Selling Greenville