When it comes to buying and selling real estate, it’s all about timing. For sellers, the goal is to put the house on the market, generate interest, and ideally close quickly. For buyers, the goal is to buy when sellers are motivated, there are more homes to choose from, prices are low, and ROI is high. People always throw around terms like “seller’s market, buyers market, and market temperature” but what do they mean for you?
If you’re thinking about buying or selling property this year, here’s a breakdown of what these markets are, and what they mean to you as a buyer or seller.
What is a Buyers Market?
A buyers market happens when there are more homes on the market than buyers looking for homes.
This puts the power in the buyers’ hands. During this time sellers are more likely to negotiate, lower prices, add extras, or accept contingencies.
The market is influenced by the economy, interest rates, real income, and changes in the size of the population.
How To Tell If It’s A Buyers Market
There are a few key ways to tell whether the current real estate market favors buyers or sellers. While you’re doing your research, pay close attention to home prices, the number of days homes for sale stay on the market and the number of homes for sale (inventory) in the area. If you notice that home prices are dropping (often with multiple price cuts in a short amount of time) it could mean that sellers are struggling to find buyers. If the same home stays on the market for weeks, even months, it is another sign that buyers are being more selective.
Another sign of a buyer’s market is the amount of inventory. When there are more homes on the market than buyers, you’re more than likely looking at a buyers market.
Population and job growth in a community can also say a lot about the housing market. When population and jobs are trending consistently downward, chances are the housing market will favor the buyers.
Advice For Homebuyers
If you’re buying a property during a buyers market, there are a few things you should know to help you be successful.
Know The Market
As a homebuyer, it is your responsibility to know the local market. When you walk into a potential sale, you should know what homes are selling for in the area and how long they’ve been on the market. This allows you to walk into negotiations with confidence, knowing what else is out there and what the competition is.
Since a buyer’s market works in your favor, there’s no need to rush. Take your time going over your options, reviewing your budget, and asking the right questions to make sure you’re getting the best deal. In a buyer’s market, there’s less of a chance of another buyer swooping in and putting an offer down on a property you’re interested in. Take advantage of being in a position that allows you to take your time.
Ask For Extras
If there’s any time to ask for extras, it’s when you’re buying a property in a buyers market. Sellers are motivated and willing to throw in extras to close a deal during a buyer’s market. Request allowances or credits to fix or upgrade things in the home, noting the “hassle” it will cause you to fix it after move-in. This is where knowing the market comes in handy as well. If you know there is a comparable property down the street that has better flooring or a newer appliance, mention this and allow the seller to throw in a credit to match these upgrades.
You could also ask for a home warranty protection plan or for the sellers to include the washer and dryer in the sale. It really doesn’t hurt to ask, and in a buyer’s market, you might just get what you ask for.
Reduce Closing Costs
Traditionally, closing costs can add 1-2% to the total sales price of a home, but in a buyer’s market, there is room for negotiation. During a buyers market, buyers can request that the seller pays some or all of the closing costs. Check with your agent to see if these costs are negotiable, and then ask the seller to cover them. This is a very common request, and if a seller is motivated enough, they’ll oblige.
Advice For Sellers
For sellers, a buyers market can present a unique set of challenges. But selling a property during a buyer’s market can be done, if you’re working with an experienced real estate professional and take these proactive steps:
Make Your Property Stand Out
Take the time to make your property shine. This means take care of repairs, invest in upgrades, and understand the market so you know what buyers are looking for. Now is not the time to ignore home maintenance issues or hope buyers won’t notice the small flaws in your home. Every light needs to be working, everything should be deep cleaned and organized, and curb appeal should be a priority. Take the time to make sure your property makes an outstanding first impression.
Invest In Your Marketing
If you’re selling a property in a buyer’s market, you have to be strategic about your marketing campaign. This means using professional real estate photography, utilizing social media, and getting creative with your marketing. Virtual tours, 3D technology, and captivating listing descriptions will help your property stand out. Because there aren’t that many buyers looking for the property during a buyer’s market, you want to quickly and effectively capture the attention of the ones that are.
Pricing competitively is always important when selling property, but it’s even more important during a buyer’s market. Buyers, especially those who have done their research, know what comparable properties are going for and won’t waste their time with back-and-forth negotiations. The best thing you can do to increase your chances of selling during a buyers market is price competitive out of the gate.
Consider sweetening the deal a little by offering to pay closing costs or including furniture or fixtures in the sale. Buyers will be asking for credits, allowances, and extras during a buyer’s market, so remaining open-minded to including these in the sale can help expedite the sale.
What Is A Seller’s Market?
A seller’s market happens when more buyers are looking for homes than there are homes for sale.
This gives the seller the power. Sellers are less likely to take less than the asking price and less likely to negotiate. Homes go fast, sometimes even before they’re listed.
How To Tell If It’s A Sellers Market
Just as there are a few key markers that indicate the local housing market favors buyers, there are indicators to look for in a seller’s market as well.
During a seller’s market, there are fewer homes for sale. Low inventory means there are more buyers than the number of homes on the market. This increased competition among buyers results in bidding wars. Homes also hit the market at a higher asking price, and are sold quickly. If you notice homes aren’t staying on the market very long, it’s a good indication that you’re experiencing a seller’s market. Sometimes, homes sell before they even hit the market, and sell at or above the asking price.
Advice For Buyers
Buying a home during a seller’s market is challenging, but not impossible. Before you start looking at homes, it’s important to be as proactive as you can so that you can quickly make an offer on a home. Here are a few ways you can improve your chances of buying during a seller’s market:
Get Pre Approved
Many sellers will require buyers to be pre-approved before considering an offer. Getting pre-approved not only speeds up the buying process but also shows sellers that you’re a serious buyer.
Timing is everything when you’re trying to buy in a seller’s market, being prepared is key. Go into your home search with a clear idea of your wants vs. needs. This allows you to quickly search properties and know right away whether or not they meet your needs. In a seller’s market, homes go so quickly that in the time it takes for you to decide if a home meets all of your needs, someone else can come in and make an offer.
Hire an Experienced Real Estate Agent.
The best tool you can use to buy during a seller’s market is representation. Hiring an experienced real estate agent will not only help you find available properties but can also negotiate on your behalf and help you quickly and effectively make decisions. A real estate agent can use their network and resources to help buyers find the right property even when inventory is low.
Make an Attractive Offer
There’s more to an attractive offer than just a higher sales price. While making an offer at the asking price will definitely help your cause, you can do a few other things to make your offer stand out. Consider putting down a higher earnest money deposit, offering a faster closing, and minimizing contingencies.
Include A Personal Touch
Find out from the seller how to make the offer more attractive, do they want a shorter or longer closing, when do THEY want to move out? Knowing these things can help you craft an offer that is more appealing to the seller. You could also include a letter about yourself and what you love about the home. You can explain why you’d be the perfect buyer for this home, and appeal to the seller’s emotional side.
Advice For Sellers
In a seller’s market, the power is in the hands of the seller. This means you increase your chances of a quick and profitable home sale. Even though the market leans in your favor, there are a few things you can do to help the process unfold smoothly.
Prepare Yourself (and your home) For A Quick Sale.
Things may happen quickly once you put your home on the market, so be ready. Prepare your home for a move, and mentally prepare for the busy days and weeks that follow. Start decluttering and packing non-essential items so that you are ready for home showings and moving day.
Focus On More Than Just The Offer Price
When the offers start coming in, look at the whole offer, not just the offer price. Pay attention to the qualifications of the interested buyers, and look for contingencies. Require that buyers are pre-approved, and ask your real estate agent to check for any red flags that could slow down or interrupt the sale of the home. Think about the things that are important to you, beyond the sales price. Do you want to move out quickly? Do you want to pass on all maintenance and repairs off to the buyer? For some sellers, these things may be more important than the final sales price. Look at each offer comprehensively.
Encourage A Bidding War
Because the ball is in your court, you have the option to price the home slightly lower than the assessed value in an attempt to start a bidding war. In a seller’s market, buyers are desperate for homes and know what properties are going for in the area. Listing your home slightly lower than comps in the area will generate immediate interest, and then you can let the interested buyers fight amongst themselves, leading to a bidding war. Because demand exceeds supply, buyers are more willing to pay above the asking price. Talk to your real estate agent about this option and if it makes sense to implement it into your selling strategy,
Once you have a clear understanding of the local market forecast in your area, you’ll be able to make informed and confident decisions about buying or selling property. It’s possible to sell during a buyers market and buy during a seller’s market, but the best way to navigate these different market conditions is to be prepared and to work with an experienced agent who knows the ropes.