Buyer’s Market vs. Seller’s Market: What’s the Difference?
Differences at a glance,
- There are more homes for sale than buyers when it’s a buyer’s market. Home prices usually go down during this time as well.
- A seller’s market is typified by fast home sales, inadequate housing inventory and escalating house prices.
- Awareness of the distinction and acting as needed can help you facilitate any home sale, whether buying, selling, or doing both.
A “buyer’s market” or “seller’s market” is determined by the changing balance of supply compared to demand. In the real estate market, these terms refer to conditions that give an edge during negotiation to either party in a home sale. If it happens to be a buyer’s market, then the buyer will have more control over the price and terms of the sale than if it were a seller’s market, whereas in a seller’s market, as you might’ve guessed, it would be reversed.
When Housing Markets Fluctuate
When housing markets fluctuate, it’s difficult to predict whether you will have the advantage as a home seller or buyer. Currently, buyers are in greater demand across the nation due to higher inventory. However, this is only sometimes the case on a smaller scale. More often than not, what we see is regional and local advancement give way to either market. These results usually depend on changes in demand for homes based on where people want to live.
By comprehending the market conditions that establish a buyer’s or seller’s market, you can better plan your timing and strategy for purchasing or selling a home. For assistance, here are some tips for managing either type of scenario.
What Is a Buyer’s Market?
When the market favours buyers, many houses are available, they take time to sell, and prices stay the same. This makes it easier for homeowners to sell if they make some concessions. If you’re looking to buy a house during this market, you’ll likely be able to negotiate on price and other conditions.
Strategies for Sellers in a Buyer’s Market
Price your home realistically: If you want to sell your home quickly, price it and consider bids that are lower than the asking price. A real estate professional can help you set a realistic asking price.
Spruce up: No matter what time of year it is, keep your home looking its best by regularly cleaning windows, floors, and rugs; power-washing the siding; and repainting (or at least touching up) the trim, front door, mailbox, and garage doors. Also, invest some time in keeping the landscaping tidy and repairing any broken steps or walkways. All of these little things will make a big impression on potential buyers.
The stage for success: It may not be easy to put away your family’s items, but it will make it easier for prospective buyers to imagine the home as their own. You could also pay a company to stage your house; though this process is more expensive, it could help you increase profits.
Be flexible about closing costs: You could make your house more attractive to buyers by offering to shoulder some closing costs. Speak with your real estate agent or lawyer about the best way and time to extend this offer to prospects.
Strategies for Buyers in a Buyer’s Market
With there being an abundance of properties on the market, buyers have the opportunity to be more choosy. Research neighbourhoods that fit not only your budget but also desired amenities. And remember- good deals will only last for a while!
Understand what you want before even approaching the seller. In a buyer’s market, it is assumed that the seller will be open to negotiation, but too much can break the deal. For each property you’re interested in, make a list of wants, so you have them ready when negotiating.
For example, if you’re most worried about having enough cash, requesting help with closing costs would be the best option; if a new roof is required in a few years, think about asking them to discount the price by that amount. Your requests should be based on your situation and the property, but (reasonably) have a list of demands ready when making your purchase offer.
What Is a Seller’s Market?
A seller’s market exists when there are more buyers than homes for sale. In this market, prices trend upwards as homeowners have their pick of buyers and can sell relatively quickly. Buyers may face competition when making home offers and might need to offer more money or additional sweeteners to succeed.
Strategies for Sellers in a Seller’s Market
Pretend it’s not a seller’s market: Even though it may be a seller’s market, don’t take advantage of the situation by not making your house look its best. A thorough cleaning, sprucing up the yard, and low-cost repairs will help elicit higher offers from possible buyers.
Avoid giving a deadline for reviewing offers: If you want to attract the most motivated buyers, do not set a deadline for reviewing offers. Some buyers will be discouraged from bidding if they know there is a chance you will accept another offer before considering theirs. (It is important to remember that you are never obligated to accept an offer from anyone, which can take as much time as needed.)
Be realistic about offers that exceed your asking price: If a buyer’s offer is significantly higher than your asking price, they will most likely require financing, which can present some added complications. The house must be appraised by a licensed professional to get a mortgage. The buyer may need more funds to cover the gap if the appraisal falls short of the offer price. So make sure high bidders are either paying cash or can show you that they have enough money saved up just in case.
Review all offers carefully: In a seller’s market, receiving multiple bids is typical. Contemplate each, and don’t just choose the highest one automatically. Review factors such as the amount of earnest money deposited with each bid, down payment size, contingencies, any feelings about you having extra time after closing to move out, etc. Given all these details, work with your real estate agent and/or lawyer to discern which offer would work best for you.
Strategies for Buyers in a Seller’s Market
Get mortgage preapproval- If you’re looking to buy a house in a seller’s market, be aware that other buyers will likely compete against you. To make your offer more appealing to the seller and increase the chance of having it accepted, get preapproved for financing from a mortgage lender. This tells the seller you have the money to back up your bid on their property. Additionally, being preapproved can help speed up final approval for financing and reduce how long it takes until closing day.
Aim to bid above the asking price.- To win your dream home in a tight market, you might have to offer higher than the listed price. You should work closely with your real estate agent to figure out how much you’re comfortable offering, but keep in mind that if the appraisal falls short of the offer, you might only be able to finance some of the amounts. If that happens, you’ll likely need some extra money for your down payment, so start saving now.
Increase your earnest money deposit.- Making a larger good-faith deposit could help your offer stand out against other bids. If your purchase contract is accepted and financing goes through, the additional money will be applied to your down payment. However, if you back out of the deal for reasons that aren’t allowed in your contract, you may have to give up some or all of the earnest money.
Be prepared for rivals who can pay in cash.- Many homebuyers have cash at the ready, and their ability to finalize a sale without mortgage approval can make them more appealing than buyers who do need such approval. If you’re competing against all-cash offers, demonstrate to the seller that your bid is just as strong by being willing to negotiate terms like the sale date or other variables in addition to the price.
Are You in a Buyer’s Market or Seller’s Market? How to Find Out
Real estate agents usually understand whether you’re in a buyer’s, seller’s, or neutral (with average housing turnover and pricing). Here are some indicators to help give you an idea too.
- Average home price trends: Increasing home prices signal a seller’s market while diminishing prices reveal a buyer’s market.
- Several days homes stay on the market before they sell: To determine if it’s a buyer’s or seller’s market, look at how long houses remain on the market. If they’re selling rapidly, it favors sellers. Slow sales likely indicate more buyers in the marketplace than properties available, which is advantageous for buyers.
- If market prices exceed or fall below asking prices: Competition among potential buyers in a seller’s market can result in purchase offers higher than the asking price. In contrast, sellers may accept an offer below their asking price or reduce their original asking price to a lower figure during a buyer’s market.
Conclusion
Just as the markets for other goods are subject to cycles, so too are real estate markets. What is a seller’s market today could become a buyer’s market shortly, as housing supply and demand ebbs and flows. By understanding the key features of each type of market and adopting relevant strategies, you can ensure that you get the best possible deal on a home sale, no matter which side of the transaction you ultimately find yourself on.
Before you even apply for a mortgage, it’s important that you understand your credit score and where you stand. Credit health is an integral part of the buyer process, so be sure to access your credit report and comprehend how it affects your qualified status.
Moreover, hire a professional and experienced Chilliwack realtor to sell or buy your home. The Best Homes on Earth Team is always available for all your questions. Contact us today to discuss your real estate process.