The longer your house sits unsold, the more likely it is to sell for less. And the window to command maximum value is smaller than you might expect.
Top Chicago-area real estate agent David Dominguez expects a bidding war for anything listed within seven days. But for a home that’s still on the market after 21 days or more under current conditions, buyers see an “opportunity for leverage” and offer 5% to 10% below asking price, he says.
If you’re aiming to sell a house in 2022, here are six of the go-to house pricing strategies used in real estate. These tactics will help you set a competitive price and forward your selling goals.
Chicago real estate is very local. There are a lot of agents who work the downtown market and only the suburban outskirts of the city. What’s their track record? What are they selling at? How familiar are they with the market? Do they understand what adds value?
- David Dominguez Real Estate AgentCloseDavid Dominguez Real Estate Agent at Realty Of Chicago
- Years of Experience 8
- Transactions 505
- Average Price Point $213k
- Single Family Homes 420
Pricing a home in 2022
In many ways, the 2021 housing market resembled the Wild West, due in large part to a depleted supply of homes coupled with low mortgage rates driving up demand. But markets inevitably started to reach a point of fatigue and prices were pushed to the max.
Starting in the fall, buyers began to grow frustrated with the hectic state of affairs. In Q2 2021, 54% of agents had seen or heard about buyers backing out of purchase contracts due to remorse over an inflated contract price, causing listings to go back on the market.
Dominguez notes that his area is becoming “a little bit more of a buyer’s market” compared to last spring. “Now, it’s a conversation. Some buyers that waited are seeing the fruits of their patience, and they’re able to get a decent house at a good price,” Dominguez says.
While analysts do not expect a crash to occur, only a slight correction and some stabilization that will still generally favor sellers, someone selling a home in 2022 should not base their house pricing strategy on what happened last year. It will be necessary to keep close track of any changes in the market with the help of your real estate agent.
Here are a few ways to do that:
Use comparable sales that are as recent as possible:
A home with better upgrades may sell for less in 2022 than a similarly sized house of lesser quality sold for as little as four months ago. Correct your price accordingly.
Anticipate the appraisal:
In recent months, it was common for buyers to provide appraisal gap coverage to secure a home in a bidding war.
However, the percentage of bids that include appraisal waivers is expected to drop from 37% in early 2021 to 24% in the start of 2022, according to HomeLight’s recent survey of over 1,000 real estate agents.
Be realistic about your home’s condition:
Are you truly move-in ready, or has your list of DIY projects gathered dust?
“My market is starting to cool a bit especially if the home is not ‘turn key,’” shares Kelly Finley, a top real estate agent in Troy, Michigan. “We are not seeing buyers offer as much over as before, and they are more likely to negotiate on repairs on inspection or walk away altogether.
Make sure your agent knows the exact area:
“Chicago real estate is very local. There are a lot of agents who work the downtown market and only the suburban outskirts of the city,” Dominguez says. “What’s their track record? What are they selling at? How familiar are they with the market? Do they understand what adds value?”
House pricing strategy #1: Start with a free online home value estimate.
It used to be that the only way to access information about pricing your home would be to pay a few hundred dollars for an appraisal or ask a real estate agent’s opinion.
Today, detailed property data is widely available online. Sellers now have a head start with the ability to do more preliminary research and access relevant data about their home in an instant.
You can begin the process of researching how to price your home with a tool like HomeLight’s Home Value Estimator.
Answer a short questionnaire to tell us a few details such as:
- Are you thinking of selling soon?
- What is the condition of your home?
- What type of property is it?
- When was the home built?
Our tool then pulls publicly available data, your home’s last sale price, current market trends, and recent sales records to provide you with an estimated range of value for your home in under two minutes — all for free.
However, you’ll need to follow up your online home value estimate with a real estate agent’s expertise for accuracy purposes.
According to HomeLight’s recent industry trends survey for New Year 2022, online home valuation tools are most likely to miss recent upgrades and location factors such as road noise, nearby power lines, and school district quality in their calculations.
|Goal of this strategy: AVMs help orient your perception of home values in your area. While they aren’t (and shouldn’t be) the sole resource used in determining an asking price, these tools provide a homeowner relevant data for an educated starting point in the process.|
House pricing strategy #2: Look to comparable sales for guidance.
Property values are hyperlocal and always shifting, so agents and appraisers rely on comparable sales, aka “comps,” to price individual houses and capture recent changes in the market.
What’s a comparative market analysis?
A detailed CMA may run 30-plus pages long and cover:
- A deep dive into the subject property, including any recent photos and new features worth mentioning
- Somewhere between 10-12 comps within a certain radius of the property and details for each
- A summary page of what each comp sold for
- A map of all included listings
- Charts and tables that show market trends data such as inventory numbers for the area and average price per square foot
Can you do your own comps?
You can do your own comps analysis, but a top real estate agent (find one through HomeLight) will have experience putting together hundreds of CMAs. They will be more accurate and efficient in pulling the right data and making dollar adjustments based on competitive differences.
For example, Dominguez deals with a lot of bungalow-style homes of about 2,000 to 2,500 square feet where additions or upgrades can increase the asking price by $100,000 to $150,000.
“When you add an addition or a coach house, it obviously brings value because it allows a lot more living space and maybe potentially an Airbnb opportunity or rental,” he says, adding that it’s important to “present the comps, see what’s actually selling in the area, and price comparably.”
How do you price based on comps?
Say you had a CMA with about a dozen listings. The summary page might look something like:
- Lowest price: $575,000
- Average price: $621,318
- Highest price: $690,000
If your house appears to be a bit better than average and the market is heating up, perhaps you price around $650,000. Or maybe the photos clearly show that the comps are more updated than your inherited home that hasn’t been refreshed in decades.
That might put you on the lower end of $575,000 to account for work needed to the home. But such a range would help you see that pricing anywhere above $690,000 is going to be way out of line, while going higher than the $620,000 average for the group should be supported by your house having some competitive advantages.
“My emotional sellers have been in the homes for generations when their parents owned that property,” says Loretta Thomason, a top-selling real estate agent in Austin, Texas. “But, when new developments take over certain areas of town, and they see everybody else selling their homes and the houses have been remodeled, sold for $400,000, they’re not taking into account that there’s $150,000 of work that’s been done.”
|Goal of this strategy: To price your home based on current market trends rather than guesstimates or wishful thinking. The best indication of what a buyer will pay for your home today is what a buyer already paid for a similar home not long ago. Comps provide an objective benchmark and point of reference to determine a price range. A seller can then get granular as to where their home exceeds or falls short of the comps as far as home condition, location aspects, and special amenities or additions.|
House pricing strategy #3: Use the real estate pricing pyramid.
This long-held real pricing strategy considers the relationship between your home’s asking price and the percentage of buyers likely to look at your home. In general, the higher you price your home above market value, the smaller your potential buyer pool gets.
You and your agent can discuss where to start on the pricing pyramid and why. For instance:
Price at market value:
Most sellers will aim for an appropriate list price at current market value, drawing in roughly 60% of active buyers. Remember, buyers and their agents research market value, too, so you want to hit the sweet spot in price.
According to NAR’s 2021 Profile of Home Buyers and Sellers, buyers typically purchased their homes for 100% of the asking price (with 29% purchasing for more than the asking price)
Price just below market value:
Pricing 10% to 15% below market value opens the potential buyer pool to 75% to 90%, according to the pricing pyramid — a sound strategy to generate more traffic when your property is unusual or your area has few recent comps.
Dominguez strategically priced a home in Park Forest, Illinois, a village south of Chicago, at 15% to 20% below market earlier this year because the community is so small (population: about 21,000), he had to stretch out the comps over several months. It sold for about $50,000 above asking price, which was 20% above market value, he says.
Price above market value:
It’s rare to price your home about 10% to 15% above market value because it narrows the potential buyer pool as low as 10%. But sometimes your agent might find this appropriate.
“We price the houses a bit higher when they’re in a good school district or there’s other added value to the property that the comps don’t have,” Dominguez says.
However, “it’s very risky,” he says. While he might start at about 10% above market value in such cases, he’ll recommend lowering the price after two to three weeks if there’s no interest.
“I always ask my sellers not to overprice, but if I feel like they’re going to, I get a commitment from them upfront that they will reduce the price within 10 to 12 days after it’s been on the market,” Thomason adds.
|Goal of this strategy: To pick a price within a given range based on your selling goals and what type of market you’re in. With the real estate pricing pyramid strategy, it’s easy to see the advantages of pricing at or below market value, and the gamble of limiting your buyer pool too much by overpricing.|
House Pricing Strategy #4: Adjust for online pricing benchmarks.
Part of a 2022 house pricing strategy is to consider where buyers primarily shop for homes: The internet! Recently, 95% of all buyers used online tools in their home search process, while 41% of recent buyers said their first step in finding a new home was to look online.
Once you have an asking price in mind, tweak it ever so slightly to make sure that it will show up with the greatest frequency when buyers are searching for properties like yours and in your price range.
For example, many online real estate sites set price filters for $25,000 increments. So, if you list your home at $352,000, buyers who filter their maximum price at $350,000 may not see it, even though the home is well within their budget.
|Goal of this strategy: Once you understand how minor price adjustments may boost your listing’s visibility on the most popular home search websites, you can avoid limiting the number of buyers who see your home. If you’re right over the edge on a $25,000 increment, consider pricing down slightly to maximize your listing’s visibility.|
House Pricing Strategy #5: Follow the seasonal shifts of your market.
Conventional wisdom suggests that the best time to sell a house is in the spring, when the balmy weather beckons people outdoors. Yet local real estate transaction data can vary drastically from national trends.
HomeLight’s Best Time to Sell Calculator analyzes data from the past five years to estimate the best time to sell a house in your area. The tool provides suggestions for the ideal time to sell your house for more money, as well as when homes historically sell the fastest in a particular market.
Based on our data, for instance, June is the best time to sell in New York City, when you could earn 9.18% more than the yearly average. Meanwhile, August is the best time to sell your house fast in Los Angeles, when homes sell four days sooner on average, according to our internal transaction data.
A skilled agent can find the benefits of listing anytime, though. Our data shows that June is the best time to sell a Chicago home fast, but Dominguez says that he’ll find more serious buyers in the wintertime, when people are “willing to put on their jackets and boots and look at your property” compared to “window-shopping buyers” in warmer weather.
|Goal of this strategy: To time your listing with seasonal factors in mind and set an appropriate price based on the time of year. If you know your area’s peak market season, you may be able to justify a higher price point and expect fewer days on market, knowing that more potential buyers are looking at that time to increase the competition for available homes. Conversely, if you’re selling in the slow season, you might aim closer to market value or slightly below to account for reduced sales activity.|
House Pricing Strategy #6: See what a cash buyer would pay.
No matter where you set your price, a traditional sale typically requires some level of effort to prepare, stage, and show a house until an offer comes together. However, some sellers need more certainty about when their home will sell and are looking for an easier solution.
The most straightforward alternative may be to request a cash offer from an iBuyer (a company that uses pricing technology to make a near-instant offer on your home). Essentially, you provide a few details about your home, the iBuyer names their cash price, and then you decide whether you want to accept or decline the offer.
If this route interests you, consider requesting a cash offer from HomeLight’s Simple Sale platform. Rather than do the work of pricing your home, you will answer a few questions, such as how much work the home needs and how soon you plan to sell, so we can learn a little bit more about your situation.
Within 48 hours, we’ll provide you with a full cash offer with the ability to close in as little as 10 days. By contrast, a transaction involving financing typically takes nearly 50 days to close in today’s market.
|Goal of this strategy: To avoid many of the common headaches involved with pricing and selling a home, or to sell a home that needs some work without having to take on a bunch of projects first. Selling your home to a cash buyer usually means you can opt to sell “as is”, which often means accepting a lower price but also fewer upfront repairs. Sellers who need to move quickly or dread showing their home may also be drawn to the benefits of requesting a cash offer.|
Pick the right strategy (or strategies) to price your house
Pricing your home does involve quite a bit of analysis and strategic thinking. And you don’t have to pick one strategy. In fact, when you combine an approach that uses comps, the real estate pricing pyramid, and is cognizant of online price filters — you may arrive at a competitive price that works to attract buyers.
To stay on track, remember the following tips:
- Request a free home value estimate from HomeLight as a starting point to get oriented with local property values.
- Hire a top real estate agent who can perform an in-depth comparative market analysis that looks at the sale prices of recently sold homes with similar characteristics. It’s easy to find a qualified agent through HomeLight’s agent-matching platform.
- Lean into your agent’s expertise as to which home features add value (such as a well-maintained patio or new bathroom) or adjust value down (such as an older roof or dated finishes). These will be specific to your neighborhood, and depend on how nearby homes measure up.
- To skip the hassles of pricing and showing your home, consider the alternative of working with a cash buyer and request your home’s Simple Sale price.
With these house pricing strategies in mind, you’re less likely to pick an inflated number to the frustration of buyers who may love your home but recognize that you’re overpriced, or undersell your home when you’ve recently put a lot of work into it.
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