Couple looking at homes in a buyers market

Buyer’s Market Or Seller’s Market?

Kevin Payne6-Minute Read
October 05, 2021

If you’ve been thinking about buying or selling a home, this might be the right time to try.

One factor to consider before making the leap: the current housing market climate. Whether it’s a buyer’s market or seller’s market can make a big difference in the home buying or selling process. Here’s a closer look at both market types and what they mean for buyers and sellers.

What Is A Buyer’s Market?

A buyer’s market happens when the number of homes is greater than the number of potential buyers. Simply put, the supply exceeds the demands in the real estate market. Buyer’s market is often used in real estate circles but can apply to almost any market where there’s more inventory than customers.

One of the markers of a buyer’s market is lower home prices. During a buyer’s market, sellers’ homes often sell right around the listing price or less. There’s little opportunity to demand anything higher without causing buyers to turn to other sellers in your area, offering a comparable home.

Sellers are at a disadvantage because of the volume of competition. Instead of waiting for the right buyer to come along, sellers often agree to a sale for far less than they hoped when the home was listed.

Another sign of a buyer’s market is seeing homes on the market for longer than average. If you drive through your neighborhood and notice that for sale signs aren’t replaced with sold signs, it’s likely there’s a buyer’s market. What’s unlikely is seeing a bidding war for a home on the market. It’s unlikely a buyer would be willing to spend above the asking price with so many homes to choose from.

What This Means For Buyers

A buyer’s market is the ideal time to buy a home. Buyers have the advantage in a buyer’s market. Not only are there more homes to choose from, but you have the power in most negotiations. The ability to walk away from a sale knowing there’s probably comparable homes on the market gives you the power. Sellers are more likely to make concessions, drop prices and accept less favorable offers.

If you’re a buyer, your goal, besides finding the home you want, is to get the most value from your purchase. This is the time to negotiate the house price with the seller. Here are some of the things you can negotiate during a home sale:

  • The house price
  • Closing costs
  • The inclusion of a home warranty
  • Repairs based on the home inspection
  • Closing date
  • Home possession date

If you’ve bought a home before, you’re probably familiar with all of the various negotiation points. Another detail that can help during negotiations is understanding the seller’s motivation for putting a house up for sale. Knowing whether they are under any financial or time constraints can speed up the buying process and lead to a better deal.

What This Means For Sellers

Unfortunately, sellers don’t have much power in a buyer’s market. You may end up having to make tough decisions, like whether to accept less money or leave your house on the market longer. The longer your home is on the market, the harder it will be to keep your listing price untouched.

As a seller, your job is more challenging during a buyer’s market. It’s more competitive, so you may need to get creative to make your home stand out. Here are a few moves you can make to get your home noticed:

Make upgrades to your home: Making improvements and upgrades to your home can separate it from others on the market. Whether it’s a small, cosmetic fix or a larger issue, do your best to address anything that buyers might bring up during the negotiation process. Some sellers opt for a home inspection before listing to tackle these matters ahead of time.

Deep clean your home: Buyers may not notice all your cleaning efforts when they stroll through your house, but they will notice when something isn’t clean. Thoroughly clean and declutter every room in your house to ensure it looks its best during showings. Don’t ignore your yard, either. Some basic landscaping will add more curb appeal to your home.

Price according to the market: Choose a price that is fair and comparable to other recent sales in your area. Few decisions are worse in a buyer’s market than overpricing. Pricing your home competitively will attract more buyers.

Up your marketing game: Most home searches start online. Improving your online listing will attract more buyers too. Have professional photos taken of your home, if possible. What people see online often determines whether they schedule a showing or not.

Offer incentives: Selling during a buyer’s market might require you to sweeten the deal to attract the right buyer. We discussed making upgrades already. Another option is to pay mortgage points, also known as discount points. Mortgage points are fees paid to a lender at closing to secure a lower interest rate. This is known as buying down the rate and can lower a buyer’s monthly mortgage payments.

What Is A Seller’s Market?

A seller’s market is the exact opposite of a buyer’s market. In a seller’s market, the number of buyers is greater than the number of homes on the market. The demand for homes exceeds the inventory or supply.

In a seller’s market, you see homes sell quicker than normal and often for more than the asking price. With fewer homes on the market, you could receive multiple offers for your home, leading to a bidding war between potential buyers.

If it’s a seller’s market, there are more buyers than there are homes on the market and it’s a good time to sell your home. Sellers may have an easier time selling their homes quickly and at a higher price.

What This Means For Buyers

Buyers will face more competition because there are fewer homes for everyone to choose from. With stiff competition, you need to be on top of your game as a buyer. That means pulling the trigger on an offer as quickly as possible when you find the home you want. Your offer most likely will be for the asking price or higher, especially if you want a realistic shot at a deal. If other buyers are interested in the same home, you could end up in a bidding war, driving up the home price even further.

You can help yourself by getting preapproved for a mortgage before you start your home search. Preapproval lets you know where you stand and gives you some credibility with the seller.

Finding the right real estate professional is key as a buyer. A good real estate professional can help you navigate buying a home in a seller’s market and will work quickly on your behalf when you find a home.

If you don’t find a home you like or within the price range, your best bet might be to wait until the market adjusts in your favor.

What This Means For Sellers

Home sellers are in the driver’s seat during a seller’s market. That doesn’t mean you should become complacent with your home sale. You want to provide value to attract the right type of buyers.

The advantage of selling during a seller’s market is that you can be more patient during the process. You likely won’t feel pressured to accept lowball offers and can take your time to find the right offer and buyer. Buyers have less leverage to make extra requests or demands. You can stand your ground and play the percentages, knowing you’re probably going to receive several offers on your home.

Is It A Buyer’s Or Seller’s Market Now?

Due to a decrease in available inventory and high competition, 2021 is predicted to favor a seller’s market, although specific market trends will vary depending on the supply and demand of homes in your community.

More generally, several factors can affect which way the housing market shifts. You could study neighborhood trend reports to determine the current climate. There are other ways to determine whether it’s a buyer’s or seller’s market:

Seasonality: The time of year affects the market as much as any factor. The majority of people tend to list their home during the spring and summer months. There are several reasons for this trend. Typically the weather is more favorable. Kids are either wrapping up the school year or already on summer break. There’s also more daylight for later showings. It’s also easier to make your house look nicer during the spring and summer months with landscaping and other upgrades to add more curb appeal.

Location: Housing market trends can vary based on where you live or plan to live. Check with a local real estate agent to determine whether they’re seeing more buyers or sellers right now.

Trust your eyes: One drive around your town can often reveal the state of the housing market. How many homes have “For Sale” signs in the yard?

Other trends that affect the housing market are amenities near a location, school district changes, housing prices and more. The housing market can vary from state to state, city to city and even different neighborhoods in the same city.

If you’re planning to buy or sell a home soon, take time to do your homework up front. One of the best moves to make is align yourself with a trustworthy real estate expert. They are well-versed in market trends and can answer questions you may have throughout the buying or selling process.

The Bottom Line: Know How To Strategize In A Hot Housing Market

Whether you’re a home buyer or a homeowner looking to sell, the current state of the housing market will inform the best way to move through the process. In a buyer’s market, buyers should leverage their negotiating powers, and sellers should look for ways to make their home stand out against other listings.

Seller’s markets, on the other hand, give sellers the opportunity to find their ideal offer and may urge buyers to move quickly on available homes.

For more information about the market conditions in your local area, check out our Neighborhood Trend Reports.

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Kevin Payne

Kevin Payne is a personal finance and travel writer who writes about family finances, banking, credit cards, and loans. Kevin lives in Cleveland, Ohio with his wife and four kids.