Whether you’re buying or selling a house — or both, as is often the case — it helps to know a bit about the market conditions.
Different types of real estate markets will mean very different things for buyers and sellers, and depending on the conditions you find yourself in, may make it easier or harder to successfully buy or sell a home.
So what exactly are buyer’s and seller’s markets? And what does that mean to you?
Buyer’s Market vs. Seller’s Market: What You Need to Know
We spoke to several real estate experts to find out what you need to know about these two very different types of markets, plus some tips for succeeding in both.
Here’s our guide to understanding buyer’s markets vs. seller’s markets.
Buying In a Seller’s Market
A seller’s market is a set of market conditions that are favorable for sellers, and less so for buyers. This might mean a low real estate inventory for buyers to choose from, or even just a high demand for homes in a particular place.
Either way, the main thing to know about a seller’s market is that it typically allows sellers to get the best deal on their homes — and that might mean you, as the buyer, will end up paying more. It also might mean buyers have to be more competitive when placing a bid on a house, since chances are you won’t be the only interested buyer.
“In a seller’s market, there are two key things to getting your offer accepted,” said Erik Wright, owner of New Horizon Home Buyers. “First, be fast. If you see a house you like, so has everybody else. Having a realtor who can get your offer submitted quickly is crucial.”
The second key to being a competitive buyer in a hot seller’s market? Make your offer strong.
“An example of a strong offer in a seller’s market would be $10,000 over asking price submitted with a pre-approval letter, $5,000 in earnest money, a five-day inspection period, 21-day closing period, and no contingencies about the sale of your current home,” Wright said.
Work with your real estate agent to find out what will make your offer the most appealing one to the seller, and then be prepared to act quickly before other buyers beat you to it.
Thinking about buying or selling a home? Here are six reasons why you may want to consider hiring a real estate agent.
Buying in a Buyer’s Market
If you’re buying a home in a buyer’s market, then the good news is this: It should be a relatively relaxed experience.
Since all market conditions come down to supply and demand, you can think of a buyer’s market as a low-demand, high-supply situation. That means you may find yourself looking at homes during a time when there aren’t many other buyers, or maybe there’s just a surplus of homes on the market.
If this is the case, the odds are in your favor — and you should use this to your advantage.
“When making an offer on a home in a buyer’s market, a seller will be more likely to agree to minor repairs or updates as part of the deal,” Wright said. “They will also usually be more willing to do things like pay the closing costs, pay for a home warranty or give you a credit towards doing your own updates or remodel.”
Negotiation can be intimidating, but if you understand a few key principles, you can do it. Here’s how to negotiate the best price for your new home.
Keep in mind that negotiating isn’t just about the home price. If you find yourself buying in a buyer’s market, you should try to negotiate things like having your seller cover closing costs (which typically cost buyers anywhere between 2% and 5% of the total value of the home) or repair expenses.
By focusing on things other than the purchase price, you might find that you end up saving even more money — without making your seller feel nickel and dimed.
Selling in a Sellers’ Market
Here’s another sweet situation to be in: selling your home in a seller’s market.
If you’re a seller in a seller’s market, chances are your home will receive multiple offers from potential buyers. (That’s provided your house is considered to be worth buying.)
One caveat: You may not want to accept the very first offer that comes along.
“The best thing a seller in a seller’s market can do is to be patient and wait for the right offer,” said Colby Hager, owner of Capstone Homebuyers. “So many times I see sellers take the first decent offer they receive, only to have better offers come flooding in.”
Another thing to keep in mind when selling in a seller’s market is to be prepared to move quickly. That means doing your best to have everything ready for your buyers in advance, including cleaning and staging the house and getting all your documents ready before listing the home on the market.
Remember, buyers will be competing for your home, and they’ll likely want to act fast once they see the house.
“Sellers should know that buyers in a seller’s market are prepared to act quickly, so everything needs to be just right when the home first comes on the market,” Hager said. “After all, this is when your home will get the most attention.”
Focus on making a great first impression, then be patient, see what offers come in and be prepared to negotiate.
Selling in a Buyer’s Market
Selling in a buyer’s market is tough, but doable if you manage your expectations.
One of the main things that sellers in a buyer’s market need to understand is that you may not get the best price for your home. Chances are there won’t be any bidding wars on your property in a housing market like this, and you may not even receive any offers that match your listing price.
Here’s what you need to know about fair market value and what that means for you as a homeowner.
One of the best ways to be competitive as a seller in a buyer’s market is to do everything you can to make your buyers happy, and keep them that way.
“A seller in a buyer’s market needs to understand that they may not get an offer at their current list price,” said Tyler Forte, CEO of Felix Homes. “Furthermore, sellers should be prepared to keep the buyer happy, whether by completing necessary repairs at the buyer’s request, or conceding to pay for certain closing costs such as title and escrow.”
Put in extra effort to make your house look nice before listing it, and be willing to accommodate buyer offers and contingencies.
Another thing to ask yourself is whether you really need to sell your home at that moment. If the answer is no, it might be a good time to put the sale on hold and wait for a more favorable housing market.
If you are pressed to sell, just keep your expectations low. Understand that it may take longer, and you may have to price your home lower, which means you may end up getting less money than you would with a better housing market.
Larissa Runkle is a contributor to The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.