Views of Real Estate: A Buyer vs. Seller's Market
Have you ever wondered when the best time is to buy or sell a home? While certain seasons may be busier than others, seasons do not directly influence the market temperament. The changes/fluctuations within the real estate market have far more to do with the concept of supply and demand than they do with the time of year. That’s why it’s important to pay attention to the housing market and whether your local area is experiencing a buyer’s market or a seller’s market.
Not sure what these terms mean? Not to worry – we’re here to help!
In a balanced real estate market, buyers and sellers are equal when it comes to negotiating. In other words, the number of properties for sale is not too low nor too high in relation to the number of buyers looking for a home.
What Is A Buyer’s Market?
This occurs when supply exceeds demand. To put it another way, real estate inventory is high, and there are plenty of houses for sale, but there’s a shortage of interested home buyers. These conditions give buyers leverage over sellers because when supply is higher and demand lower, the market is forced to respond and the average sale price goes down.
In a buyers market homes linger on the market longer. So, sellers must compete with each other in order to attract potential buyers. Typically, sellers will drop their asking prices to gain an advantage in the market. They are much more willing to negotiate offers to prevent losing a buyer.
A buyer’s market is the ideal time to purchase a new home because prices are lower and there are fewer buyers to rival offers with.
Take your time — during a buyer’s market, you are typically afforded more time to make your decisions because there’s less of a concern about losing out on a property you’re interested in.
Know what’s available — see as many properties that fit your criteria before making an offer. Knowing what’s available on the market is highly beneficial. Having this knowledge help you determine what your ideal home is if it has been unclear, and will be how you find it!
Analyze comparable properties — becoming familiar with comparable properties on the market is key to negotiating. You will be better informed when it comes to negotiating an offer, because you will have seen with your eyes how this property compares to others like it. Sometimes buyers don’t know what does and doesn’t impact market value, I as an experienced REALTOR can help you with this.
For example: Let’s say you’re interested in a three-bedroom house with an asking price of $550,000. If you find that there are a dozen similar three-bedroom homes priced around $475,000, you know the house is likely overpriced in the current market.
Pay attention to days on the market, because the longer a house has been available, the more power we may have negotiating for a lower price. Sometimes negotiating a lower price is not possible, or even realistic if the home is priced well for the current market. In this case, negotiation is still an important tool as we will work hard to get the terms and conditions most agreeable to you. Think closing date, potential seller repairs, or unattached goods included in the sale (eg hot tub / furniture etc).
Tips For Sellers
If you find yourself selling your home during a buyer’s market, take your realtors advice to make your home stand out.
Make some needed repairs — since there are more properties for buyers to choose from, you’ll find that they may be a lot pickier. You’ll want to do any necessary repairs before putting your home on the market. Consider making minor improvements to attract buyers to your home, but make sure to check with a REALTOR before investing any money! Sometimes sellers make improvements that actually do not increase their property value or saleability.
Clean and depersonalize your home — spend some time considering how others will view your property. If a buyer can’t envision themselves living in your home, or think the home hasn’t been well cared for, they won’t make offers or will offer much lower than what the home is worth.
Do a deep clean of your home
Get rid of any clutter and touch up your landscaping in preparation
Depersonalize your space as much as possible: get rid of family photos, papers, souvenirs and anything else that points to you living there
Price it competitively — it is crucial that you ensure your home is competitive by pricing it to sell. Your realtor can survey similar homes on the market to see what they’re asking, what homes are selling for, and current demand conditions to make the best suggestions. When you do get an offer, remember that it is an offer, no matter what it contains, and all offers are worth careful consideration and a calculated response.
Market it like a pro — your marketing will matter even more than it would in a neutral or seller’s market, so by having a realtor get stellar professional photos your home will stand out. If your home will be vacant or your decor is dated, your realtor will be able to give great advice to show it in it’s best possible way.
What Is A Seller’s Market?
A seller’s market is when demand exceeds supply. In other terms, there are a lot of interested buyers, but the real estate inventory is lower than the amount of buyers looking to buy. Buyers > Sellers. Since there are less homes available, sellers have advantage.
In a seller’s market, homes sell faster, and buyers must compete with each other in order to get a property offer accepted. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can often have a higher asking price than they would have otherwise, potentially even higher than any similar homes have sold for. The increased interest means that buyers do not usually have the power to negotiate and are more willing to accept the home as-is.
Due to the shortage of housing, these conditions often lead to multiple offers. During a multiple offer situation, buyers know they are competing and with how many other offers so this will drive up the price, typically above what the seller initially asked for. However, not all multiple offer situations result in an offer that is near asking price or above. This is why it is crucial to be working with a realtor to know whether you are in a buyers or sellers market, and what the most recent comparable sales are before making your offer.
Tips For Buyers
Not only is access to house is more difficult because of rising prices, but buyers are in strong competition to find the property that suits them.
Here are some tips for standing out:
Get your financing pre-approved and have your lender give you a pre-approval letter.
Know the maximum amount you can offer based on your budget
Know exactly what you want and what you’re willing to compromise one. It is easy to lose out on a property while deciding to make an offer or not
Be prepared for quick decisions
Consider writing a letter to the sellers about why you are interested in their home and why it fits exactly what you are looking for
Whenever there’s a limited supply of houses on the market and a wealth of interested buyers, time is of the essence.
Act fast — If you hum & haw over a house you know you would be gutted if you missed out on, you may find that it’s no longer available by the time you go to make an offer.
Be patient & level headed— Remember that you may lose the opportunity to offer on a home, and you also may not be a chosen offer in a multiple offer situations. Assess every potential offer independently as much as possible, and determine what the home is worth to you, and in your circumstance, prior to offering.
Many buyers end up suffering during a seller’s market because they get frustrated. Inexperienced buyers or those under pressure to buy can also easily get caught up offering more than they can afford or the property is worth. Ensure that you and your realtor know you real budget, as well as what comparable properties are selling for before offering – we know the industry and are not emotionally invested in any particular sale and can show you the data and help you make an informed decision on your offer price.
Don’t settle — On the flip side, some buyers will end up making offers on homes they otherwise wouldn’t be interested in because they’re tired of losing out. Remember, buying any property is a huge investment with penalty implications if you choose to sell before your mortgage term is up, or that you may not have enough equity to sell if home prices drop drastically. Don’t settle on a home just because it’s available. Unless you have to move immediately, it’s a much better idea to wait it out, find alternate arrangements, and wait for the right house to come up or resume your home search after the market cools down. This can be a hard decision.
Tips For Sellers
It is easier to sell a home in a seller’s market, however the advice from your realtor for preparation & presentation will result in the highest potential sale price. It is still advisable to do the following:
Clean and organize — To begin, make sure that your home is in good condition and has been cleaned and organized before you market or show to the public or take pictures for the listing.
Price it fairly — Even though homes tend to sell for more money in a seller’s market, it still helps to price your home fairly. If you set your asking price at or slightly below fair market value, you’re likely to attract more interested buyers and multiple offers. Sometimes this can drive prices ever higher. This is only one strategy however, but determining market value and potential sale price with your realtor is crucial before choosing a list price.
Carefully consider offers — It is even more important during a seller’s market that you and your realtor carefully review all of the details of your offers, and that your realtor gathered additional information on the buyers (if possible). The last thing you want is to accept an unrealistic offer and be forced to put your home back on the market when the deal falls through. The longer your home is on the market, the more questionable it may seem to buyers, and the more power they may have when negotiating.
The Bottom Line
When buying or selling property, it helps to know where the market stands. As a buyer, you’ll want to purchase a home in a buyer’s market, as there will be an influx of available homes and less competition. But as a seller, you’ll be hoping that you list your house during a seller’s market, so there are fewer properties for sale and a substantial number of buyers interested.
However, life events do not always line up perfectly with the market! So regardless of the conditions in your area, hiring a real estate agent is the best way to navigate the housing market. Whether the market is strong or weak, you’ll want to have a leg up on the competition, and real estate agents have the knowledge and skills necessary to ensure that you do.
If you want a real estate agent to help you through your process contact me and we can get started!
Alanna Dawley Realtor®
Grassroots Realty Group
