Buyers Market vs. Sellers Market

by Jessica A. | Apr 20, 2021 | Community

What is a Buyer’s Market?
A buyer’s market occurs when supply exceeds demand. In other words, real estate inventory is high, but there’s a shortage of interested buyers. These conditions give buyers leverage over sellers because when supply is higher and demand lower, the market is forced to respond.
In a buyer’s market, real estate prices decrease and homes linger on the market longer. So, sellers must compete with each other in order to attract buyers. This means sellers will possibly drop their asking prices to gain an advantage in the market, and they are much more willing to negotiate offers to prevent buyers from walking away.

Tips to Buyers:
A buyer’s market is the ideal time to purchase a new home because prices are lower and there are fewer buyers to compete with.
Take your time: During a buyer’s market, it’s best to take your time 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 as possible before making an offer. Knowing what’s available on the market is highly beneficial because it will not only help you ensure that you find your dream home, but also allows you a greater ability to negotiate price.
Analyze comparable properties: Becoming familiar with comparable properties on the market is key to negotiating effectively. By analyzing comps, you can use their pricing to your advantage.
Pay attention to days on market: The longer a home has been available, the more power you’ll have negotiating for a lower price. Even if you don’t ask to lower the price significantly, you can still negotiate for contingencies, seller concessions, and repairs.

Tips to Sellers:
If you find yourself selling your home during a buyer’s market, do everything you can to make it stand out.
Make repairs: Since there are more properties for buyers to choose from, you’ll find that they can be pickier. You’ll want to do any necessary repairs before putting your home on the market and consider making minor improvements.
Clean and depersonalize: Spend a lot of time considering how others will view your property. If buyers can’t envision themselves living in your home, they won’t make offers. Do a deep clean of your home, get rid of any clutter, and touch up your landscaping. As you clean, try to depersonalize your space as much as possible, too.  Get rid of family photos, papers, souvenirs, and anything else that points to you living there.
Market like a pro: Your marketing will matter even more than it would in a neutral or seller’s market, so make sure you have professional photos taken of your property. If your home will be vacant or your décor is dated, it’s a good idea to hire a stager. With the assistance of a professional, you’ll be able to transform your rooms so they look cohesive and polished.
Price competitively: It’s crucial that you ensure your home is competitive by pricing it to sell. Survey similar homes on the market to see what they’re asking. Make sure your asking price is either similar or lower than the comparable homes in your area. When you do get an offer, make sure that you judge it fairly. Since you have less power to negotiate, you should consider offering to pay a portion of the closing costs and for any repairs requested.

What is a seller’s market?
A seller’s market arises when demand exceeds supply. In other words, there are many interested buyers but there are fewer homes available, and sellers are at an advantage. In a seller’s market, homes sell faster and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can raise their asking prices. Furthermore, the increased interest means that buyers rarely have the power to negotiate and are more willing to accept properties as-is. Due to the shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for.

Tips for Buyers:
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 find your dream home during a seller’s market, you better act fast. If you drag your feet over a house you know you want to buy, you may find that it’s no longer available by the time you wish to make an offer. You should get preapproved for a loan ahead of time so your financing is in order when you need it.
Know you’re at a disadvantage: When it comes to making an offer, keep in mind that you’re the one at a disadvantage. A seller’s market is not the time to try to push contingencies, concessions, specific closing dates or repairs. Focus your attention on what’s most important to you. If there are certain stipulations you want written into the contract, think hard about whether they’re worth losing the property over. If you can make an all-cash offer, you should. Sellers prefer buyers who are willing to pay in cash because they don’t have to worry about the deal falling through due to issues with financing.
Be patient: If you find that you keep losing out on the homes you’re interested in, it’s crucial to be patient and not get discouraged. Many buyers end up suffering during a seller’s market because they get frustrated. Inexperienced buyers caught up in bidding wars will often offer more money than a home is actually worth – or they feel comfortable spending – in order to get the home they want.
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 and often a 30-year commitment. Don’t settle on a home just because it’s cheaper. Unless you have to move immediately, it’s a much better idea to wait it out and resume your home search after the market cools down.

Tips for Sellers:
Since sellers must compete with each other to attract buyers in a seller’s market, it’s helpful to know how to increase interest in your property.
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 the property.
Price 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. Some sellers choose to list their homes for slightly less than the assessed value in order to encourage a bidding war.
Carefully consider offers: It’s even more important during a seller’s market that you carefully review the offers you receive. Sellers are often so focused on choosing the highest offer that they fail to examine the financial strength of each buyer. Just because buyers say they’ll pay a certain amount for your home doesn’t guarantee they’ll actually be able to obtain those funds. Lenders will not allow buyers to borrow more than the assessed value of your home. 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 will seem to buyers, and the more power they will have when negotiating.
Ensure preapproval: For any buyers who require financing, you should ensure that they have been preapproved for a loan. Preapproval requires that buyers’ finances and credit history are verified, making it far more likely they’ll ultimately be able to obtain a loan for a specific amount of money. Prequalification, on the other hand, is just an estimate of buyers’ finances.
Be aware of contingencies: Also, be on the lookout for offers that include contingencies. Offers that include stipulations, like mortgage contingencies, home sale contingencies, appraisal contingencies and inspection contingencies, enable buyers to back out of sales contracts if certain conditions aren’t met.