You’ve likely heard the terms buyer’s market and seller’s market mentioned in passing, but if you’ve ever wondered when the best time would be to buy or sell a home, you’ll want to understand the difference between the two. While it may seem like certain seasons offer better conditions for buyers or sellers, the reality of the real estate market is that it’s mostly influenced by economic conditions, consumer confidence and good ol’ fashioned supply and demand.
What’s The Difference Between A Buyer’s And Seller’s Market?
A seller’s market happens when there are more buyers than there are houses for sale. On the other hand, a buyer’s market occurs when there’s an excess of homes for sale and fewer buyers looking to scoop one up.
In this type of market, buyers will likely spend a lot more time looking for homes and considering their options since they’re not in a rush to compete for the sale. Home prices are usually stable in this market but may even be dropping as buyers will have more leverage in this situation.
If you’re on the hunt for a new home, purchasing in a buyer’s market is ideal because you’ll find lower prices and less competition when it comes to finding your dream property. Consider these tips as you begin the search:
1. Cover your bases by seeing as many properties as you can before making any decisions. Knowing what’s available on the market will help you better understand what you can afford based on your budget and will ensure you find the home of your dreams, and not just the first home you can afford.
2. Take your time to search, view and analyze your options. In a buyer’s market, time is on your side so there’s no need to rush into the purchase of a home if you aren’t sure what you need or if you want to see other properties. The more you analyze, the more you can use your knowledge of price and value to your advantage.
3. Make note of how long a property has been on the market as you can use this to your advantage when it comes to negotiating a price.
You should also make it a point to get preapproved for a mortgage so you’re aware in advance what you can afford to buy. You may also consider saving up more money than necessary for a down payment to give you some leverage over other buyers. Being responsive with the seller and flexible with your move-in date can also help you in a more competitive situation like a seller’s market.
In this type of market, the prices of homes will likely increase and there’s a good chance that sellers can expect to receive multiple offers, or even a bidding war between potential buyers. As a result of this, the seller holds more negotiating power in this market so buyers who come in with too low of an offer or with too many conditions, are going to find it difficult to buy a home.
If you find yourself selling during a buyer’s market, you’ll want to put in the time and effort to ensure your property stands out amongst the others:
1. Your marketing will play a huge part in how quickly you sell your home and how much you can get for it. Consider hiring a professional to help with photos and staging to give yourself the best shot possible of standing out for all the right reasons.
2. Price your home to sell by researching comparable properties in the area and understanding what unique value it provides for potential buyers. Selling in a buyer’s market means you’ll have less power to negotiate, so ensure you price your home competitively and review your offers subjectively so you don’t get stuck in a rut of receiving low ball offers you refuse to accept.
3. Investing in the necessary labour and materials to complete any minor repairs could be the deciding factor for a potential buyer. Also consider decluttering and depersonalizing your space to remove any potential barriers that may cause buyers to walk away for fear of extra effort or money being required on their part to fix up or customize a space to their liking.
Be patient through the process and flexible with your terms and try to have an open schedule for viewings to give yourself the best chance to sell fast in any market.
A balanced market quite literally means there is an equal number of homes for sale and buyers to purchase them. When completion is more equal, you’ll likely find more stable prices, reasonable offers, standard timelines and in general, less friction between buyers and sellers.
How Do I Know If I’m In A Buyer Or Seller’s Market?
If you’re on the hunt for a new home or thinking about putting yours on the market, you’ll want to know if your area is currently experiencing a buyer’s or seller’s market.
To get a better idea of what type of market you’re working with, consider the following:
1. Check out recent properties that are comparable to yours (or have characteristics you desire) and have recently sold. If it appears that they’ve been selling for a low price, it’s likely to be a buyer’s market. If you notice they’re generally selling above asking, it’s likely a seller’s market.
2. Take a look at the current number of homes available for sale in your area. If the number is quite large, you’re likely in a buyer’s market. If you find the number is small and there aren’t many houses listed, you’re likely in a seller’s market. If you’re not sure how to judge the number you’ve come up with, divide it by the number of homes that have sold in the past month. If the answer is above 7, you’re in a buyer’s market. If the number is below 5, it’s a seller’s market. Anything in between those two would be considered a balanced market.
3. Look closely to see how long a property has been on the market as this will likely give you a better idea of what type of market you’re looking at. In a seller’s market, homes are always scooped up very fast, versus a buyer’s market where things aren’t as urgent or desperate.
4. Reviewing the price history of a home’s listing should also help you better understand the market. In a buyer’s market, you’re likely to see price reductions happen over time. Be sure to look at a variety of listings to ensure that what you’re seeing is an actual trend and not just a case of a few homeowners overvaluing their home and paying the price for a listing price that’s far too high.
Whether you’re buying or selling, it’s important to understand where the current market stands and what you can expect to encounter from either side as a result. Staying one step ahead will ensure you’re able to make strategic and informed decisions that are best for you. Not sure where to start? Consider reaching out to a mortgage specialist or real estate agent to learn more about how to navigate different markets successfully as a buyer or a seller.