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Buyers Sellers Market

Shifts in supply and demand can create a "buyer's market" or "seller's market" for almost anything. In real estate, these terms refer to conditions that give an edge to either party in a home sale. In a buyer's market, conditions give the homebuyer an edge in negotiations on price and terms of the sale, and the home seller is the one with a leg up in a seller's market.

buyers sellers market

A buyer's or seller's market could be present as part of a national trend, as has been the case recently as home shortages and increased consumer demand have given home sellers the advantage. Regional and local buyer's and seller's markets are historically more common, however. These may reflect the changes in demand for homes in specific towns, neighborhoods and school districts as generations and populations shift.

Understanding the market conditions that create a buyer's market or a seller's market can help you frame your timing and strategy for buying or selling a home. Here are some guidelines for dealing with either situation.

A buyer's market is one in which the supply of homes is abundant, houses take a relatively long time to sell, and home prices are flat or in decline. Under these conditions, it is relatively difficult for homeowners to sell their properties, and that gives buyers greater choice and opportunity to strike bargains on price and other terms of sale.

Stage for success. To better enable prospective buyers to picture themselves living in the house, dial back personal items that remind them you live there. Putting away toys (for humans and pets) and stowing family photos and other personal items may make the place feel less like home to you, but it also may make it easier for prospective buyers to imagine it becoming theirs. You can also pay a company to stage your house for you. This is a more involved process and isn't cheap, but it could help you get more money for your home.

Be flexible about closing costs. If a buyer is on the fence about choosing your house over another, sharing the burden of closing costs could swing them your way. Consult with your real estate agent or attorney for advice on how and when to communicate this offer to potential buyers.

Take time to consider your options. A luxury of a buyer's market is the opportunity to see a lot of available properties. Make the most of that to be sure you find a great house, and also a community and neighborhood that match your wish list. You may have some time to mull your decision and check out a community before you make an offer, but remember that homes won't remain available indefinitely.

Prioritize the concessions you seek. You can expect the seller to be flexible in a buyer's market, but everyone also has a breaking point, and you shouldn't plan on making endless demands. With each property, work up a list of things you might ask for. For example, if cash is your biggest concern, asking for help with closing costs could make the most sense; if a new roof will be needed in a few years, consider asking them to take all or part of that out of the price. Specifics will depend on your situation and the property, but you should have a (reasonable) list of requests in mind when you make your purchase offer.

A seller's market is one in which the supply of available homes for sale is relatively tight, houses tend to sell quickly, and home prices are on the rise. Under these conditions, it is relatively easy for homeowners to sell their properties. Buyers must compete for available houses, and may have to sweeten their offers in order to stand out.

Pretend it's not a seller's market. Don't allow favorable market conditions to let you skimp on presenting your house in the best possible light. Do a thorough cleaning, spiff up the yard and make low-cost fixes before putting your home on the market so you'll attract the highest-possible offers.

Avoid giving a deadline for reviewing offers. Specifying a date when you'll consider offers may dissuade some of the most motivated buyers, who'll bid hoping you'll accept their offer immediately. (Of course, you're under no obligation to accept an offer on any bidder's timeline, but there's no reason to discourage eager buyers, either.)

Be realistic about offers that exceed your asking price. In the heat of a seller's market, buyers may be motivated to make purchase offers for more than the price you've set on the house. That sounds great, but keep in mind that buyers who require financing will not get a mortgage amount greater than the house's appraised value. So make sure high bidders are paying cash or can show they have sufficient money to cover the gap if the appraised value falls short of their offer price.

Review all offers carefully. Multiple bids are common in a seller's market, and it's to your advantage to review all of them in detail and not necessarily jump on the highest one. Consider the amount of earnest money that accompanies each deposit, the size of each potential buyer's down payment, any contingencies, potential willingness to give you extra time for moving after the deal closes, and so on. Consult your real estate agent and/or attorney to determine which offer is best for you.

Get mortgage preapproval. In a seller's market, you'll likely be competing with multiple rival buyers, and sellers will want every reasonable assurance that you can follow through on your offer. Mortgage preapproval isn't a guarantee of financing, but it tells a seller you have the financial means to cover your offer and it can speed final approval and reduce time to closing.

Consider bidding more than the asking price. Getting the house of your dreams in a highly competitive marketplace sometimes requires sweetening the pot with an offer that exceeds a home's listing price. Work closely with your agent to decide how much to offer, and keep in mind that you may not get financing on the full offer price if the appraisal comes up short. In that event, you may need some additional cash to cover your offer, so do all you can to prepare for that contingency.

Be prepared for rivals who can pay cash. Investors with cash in hand make up a significant portion of the homebuyers in many markets, and the certainty of their offers can make them more attractive than those of competitors who require mortgage approval to finalize a sale. Take steps to make your offer competitive in the face of cash offers. For instance, you might be prepared to be flexible about terms of the sale, timing of the closing and other variables besides just price.

Your real estate agent can let you know if you're in a buyer's market, seller's market or something in between (with relatively stable housing turnover and pricing). But here are some of the indicators to watch for.

Real estate markets are subject to cycles like the markets for many other goods, and a seller's market today could become a buyer's market in a year or two as housing supply and demand ebb and flow. Understanding the hallmarks of each type of market, and adopting applicable strategies can help you cut the best possible deal on a home sale, no matter which side of the transaction you end up on.

Overall, U.S. housing prices are still rising. The median national home price for listings grew to a new all-time high of $450,000 in June, up 16.9% compared with last year. Home prices decreased in only three of the top 50 markets in June: Rockford, IL (-1.0%); Topeka, KS (-1.9%), and Cape Girardeau, MO-IL (-2.0%).

The June report shows that 14.9% of listings slashed their price that month, nearly double the percentage that had done so a year earlier. Homes in Austin, Phoenix, and Las Vegas saw the biggest growth in price cuts, indicating that some sellers have yet to adjust their expectations to this new reality.

Nonetheless, for buyers with deeper pocketbooks and more wiggle room, there is an upside: With fewer buyers out there and a greater supply of homes, they will have a lot more leverage with sellers than they had before.

Due to the shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for.

Before you list your home, see what else is on the market in your asking price range. What does your home offer that buyers will find more attractive? Even in a condominium or suburban tract, some locations and models will be more appealing to certain buyers than others. Maybe you have a convenient first floor unit or a quiet top floor unit, a house with convenient freeway access or a perfect backyard for dog owners.

One way to make your home more attractive to potential buyers is to hire an inspector yourself to identify problems that you should fix before listing. Taking this extra step will theoretically allow your home to sail through the appraisal and inspection process once you have an interested buyer.

Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible.

Follow interest rates: Lower mortgage interest rates allow more buyers to enter the marketplace (which is good for sellers). When rates are high, more buyers are priced out of the housing market. Interest rates for 30-year fixed mortgages have been at historical lows during the pandemic, allowing many first-time home buyers to enter the game. Check online or keep an eye on financial headlines to watch for signs of rates increasing.

The fair market value of your home is the price your home would sell for in the current local real estate market. This number takes into consideration the health of the real estate market in your area, as well as local housing prices, and assumes that both the buyer and seller are knowledgeable, willing, and not under any unreasonable pressure to make a deal. 041b061a72


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