It’s only natural to want to figure out what type of market you’re entering when you decide to list your home for sale. There are distinctive differences between a buyer’s and seller’s real estate market that are worth learning about.
Seller’s markets are characterized by:
- A depleted inventory of homes for sale.
- Escalating home prices.
- Multiple offers on homes in good shape and located in decent areas.
- Buyers have little bargaining power.
Let’s take a closer look at each of these characteristics.
The most common cause of low inventories in a real estate market is a combination of few homeowners listing their homes and strong buyer participation in the market. It’s a matter of supply and demand.
Escalating Home Prices
The economic principle of supply and demand works with most commodities, including real estate. When buyer demand is high but the supply of available homes is low, those homes that are available increase in value.
Multiple Offers are Common
When there are few decent homes on the market yet plenty of ready and able buyers vying for them, multiple offers on suitable homes become common. Or, as I always
say when I see the inventory shrink “Home listings dry up and we break out in bidding wars.”
Like the tug-of-wars with products at Black Friday sales, bidding wars are commonplace in seller’s markets. This is very difficult for first time home buyers. Usually they do not have the resources to pay more out of pocket.
Buyers have little Wiggle Room
Sellers are in the driver’s seat in this market. They dictate the terms, they set the price and they have all the power when deciding who will purchase their home. It’s frustrating for buyers to know that they have no wiggle room for negotiations and must come in with their highest and best offer. This is particularly difficult for first time home buyers. Usually they do not have the resources to pay more out of pocket.
Turn these seller’s market characteristics backward and you’ll have a description of a buyer’s market. Inventories of available homes are large, there are few buyers in the market for a home and prices typically . Buyers dictate the negotiations and sellers may find themselves taking less for the home than they hoped or offering concessions to buyers to entice them to buy the home.