Real Estate 101: Buyer’s Market vs. Seller’s Market

What is the difference between a buyer's market and a seller's market?

Whether you are looking to purchase a home or sell a home, it’s important to understand what kind of market we are in and adjust your expectations accordingly. Purchasing a home is a major life event and being able to get the home you desire at a low cost is ideal, while sellers understandably want to sell their property for as much as possible. Several factors such as demand, time on market, price, and even the season of the year all play a role in the housing market. Knowing how to capitalize can save you tens of thousands of dollars.

Put simply, the housing market runs on the basic principles of supply and demand. There are either too many houses with too few buyers (buyer’s market), or there are too many buyers with too few houses (seller’s market).

What is a Seller's Market?

As mentioned above, a seller’s market is when there are more people looking for a home (buyers) than there are homes for sale (sellers). Whether or not this benefits you depends on which side of the transaction you’re on.

When buying a home during a seller’s market, there will be strong competition. Bidding wars will commence and you could even place offers on 20+ homes with no luck. Here there needs to be a healthy balance between being patient for the right house that suits your needs, while also striking while the iron is hot. Note: if you have the ability to wait several months to a year, you can wait for the housing market to simmer down and become more favorable for a buyer.

When selling a home during a seller’s market, you are in the driver’s seat. A bidding war is wishful as it could drive up the price of the home without much work. Choosing the right offer and making sure that the prospective buyers can afford the property is crucial. The highest offer doesn’t mean the buyer can afford the house, as mortgage companies will often only lend the true assessed value of the house.

What is a buyer's market?

When buying a home during a buyer’s market, you have the advantage of fewer competitors and more options. Hint: take your time! There’s less likely to be another buyer for the property you’re interested in, so reviewing all of your options is best. Additionally, take into account how long the property has been on the market. Oftentimes sellers will re-list their homes to keep the listing “fresh”, but the longer it’s been up the more leverage you will have as a buyer. You may fall in love with a particular property, but having multiple options will help manage expectations and give you a better idea of how much certain houses should cost. Comparing those options allows you to potentially make a favorable offer the seller’s may have no choice but to accept.

When selling a home during a buyer’s market you’re going to want to make your listing as enticing as possible. Since the potential buyers will have their pick of the litter, you’ll want them to see your home as the top dog. The house should be clean and necessary repairs should be made. Repairs are often requested from a buyer after an offer is made and inspection completed, but getting ahead of it can make your house attractive. An experienced, top realtor can certainly help.

Things to remember

Here are some other helpful tips:

  • Seasonality affects the market – a home in Scranton, PA is more likely to sell between May-August than in the brutal cold of December and January. Location also matters.
  • Holidays and school year – people are unlikely to move their family as they prepare for major holidays, or before their children finish the school year.
  • People in the market to sell a house are generally also in the market to buy a house. Therefore, as a buyer you may be able to get a better deal by leveraging the seller’s need to move quickly. 

Be sure to check out our issues to consider when purchasing a home (i.e. tax planning, mortgage, cash flow and estate planning issues) and some advice on how much house you can afford.

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