When it comes to home buying, there’s no shortage of things to consider. You’ve got the neighborhood, the price range, and the home itself. Then, there’s choosing the right lender and real estate agent while navigating the home buying process. There are so many important factors, but one that’s commonly overlooked is the type of real estate market you’re shopping in. The current market is always referred to as either a buyer’s market or a seller’s market, and the distinction between the two is key. That’s because buying a home in a buyer’s market vs. a seller’s market looks different.
Buyer’s Market vs. Seller’s Market
The key to shopping for a home successfully is knowing which kind of market you’re in. Here’s the primary difference between a seller’s market and a buyer’s market:
- In a seller’s market, demand is higher than supply, which means there are few properties for sale but lots of shoppers. When you combine low home inventory with a high number of buyers, you get a competitive market that favors sellers.
- However, in a buyer’s market, supply is higher than demand. This means there are a lot of properties for sale but not many shoppers. High home inventory plus few buyers equal favorable market conditions for home buyers.
When you combine low home inventory with a high number of buyers, you get a competitive market that favors sellers.
Tips for Buying in a Seller’s Market
Right now, we’re in the midst of a seller’s market. There are plenty of home shoppers out there competing for a small number of available properties. This makes for a more difficult experience for most buyers, but it’s a seller’s dream. If you’re shopping for a home right now, here are some tips for making the market work to your advantage.
- Get pre-approved. This is different from a pre-qualification, which is little more than a conversation with your lender about your finances and intentions to purchase a home. When you get pre-approved, your lender will check your credit and review your financial and employment history to estimate how much home you can afford. A pre-approval puts this in writing and gives you more buying power, making you stand out among competitors. Why? Because a pre-approval tells the seller that you’re serious and, therefore, likely to make this quick and easy for them.
- Hire a great real estate agent. We can’t stress the importance of partnering with a top-notch real estate agent enough, especially when you’re buying in a seller’s market. It’s not enough to simply guide you through the process—your agent should be experienced in adverse market conditions and proficient in the art of negotiation. They should take the lead on networking for you, advocating on your behalf, and unearthing listings that haven’t hit public websites yet. This is the kind of real estate agent who can help you win in a competitive housing market.
- Keep your search under budget. Typically, when a home buyer sets their price range, it changes once they start seeing the houses they can afford. It might be tempting to shop a little above your limit, but you should avoid this, especially in a seller’s market. Search for homes under your budget. That way, when you’re ready to make an offer, you can bid up and thus outbid other buyers.
- Don’t have your heart set on one home. Now is not the time to fall in love. You have to be flexible with your wants and needs list and have an eye that finds potential in properties you’d normally write off. Hold your options loosely and keep an open mind to avoid getting your heart broken when your favorite home is sold overnight.
- Expand your search. This tip keeps in step with the previous point. When you’re buying in a seller’s market, you don’t have the luxury of picking one or two favorites. You have to be flexible and willing to expand your search into neighborhoods and types of homes you normally wouldn’t consider. Perhaps there’s a part of town that is farther from the amenities you like but has nice homes within your price range. Or, if you’ve been eyeing charming bungalows, consider taking a chance on a new construction. It’s all about staying nimble in a tricky market.
- Be ready anytime. Clear your schedule, because in a seller’s market, you have to be ready to make moves at any moment. There’s no waiting until the weekend to view an open house. This is a key distinction in the buyer’s market vs. seller’s market conversation. It may look like leaving work during your lunch break to view a listing, or driving straight from work to meet your agent at the house. It may even mean skipping the in-person altogether and opting for a video walk-through with your agent. Unconventional market conditions call for unconventional methods!
- Make a strong offer. A strong offer helps you stand out among other home buyers. This is why cash offers typically win—because it’s convenient for the seller and catches their attention. What’s another way to get a seller’s attention? Write a letter telling them about what you love about their home. You can get sentimental—it’s OK to tug on the heartstrings a little bit. If the seller is pretty attached to their home and it means a lot to them, making an emotional connection with them could work in your favor.
- Prepare for bidding wars. This is where it really pays to have a stellar real estate agent and an expert mortgage professional on your team. In a seller’s market, rarely will you have a clean deal that doesn’t involve other buyers vying for the same property. In a bidding war, it helps to ask yourself, “What else can I offer the seller?” One way to outbid other buyers is to be flexible with the seller’s move-out date. Use your negotiating power to accommodate the seller, not demand from them.
- Consider waiting. Hey, maybe this isn’t the best time to buy a house—and that’s OK. You may need to come to terms with waiting until the market shifts. Better than settling for a house you’re not satisfied with for fear of missing out entirely.
Tips for Buying in a Buyer’s Market
So now that we’ve covered home buying in a seller’s market, let’s look at the flip side: the buyer’s market. When you think about house hunting, you may not realize it but a buyer’s market is probably what comes to mind. Real estate prices are generally lower. Homes are usually on the market longer. Sellers compete by dropping prices. Shoppers can go at their own pace. Though it can be less stressful than a seller’s market, it’s still important to be savvy.
- Don’t rush it. This is the time to enjoy the process. Since inventory is high and competition is low, you’re less likely to lose out on the home you love. So pace yourself and don’t feel like you have to put in an offer on the first decent house you find.
- Hire a great real estate team. Yes, we’ve said this before, but it bears repeating. Even when the market is in your favor, a good agent and mortgage professional can be invaluable resources. They should be able to ask you what you’re looking for in a home, take that list, and find properties that meet your wants and needs. Additionally, they can help establish a home purchase budget, set up home walk-throughs, connect you with vendors, communicate with the seller, negotiate terms, find listings that haven’t gone public yet, and so much more.
- Shop around. When your options are many, it’s wise to see every available property (that meets your criteria) before making an offer. A buyer’s market is a good time to even see homes you wouldn’t normally consider because you have the time to entertain unique options. The stakes are lower, so have fun with it!
- Negotiate confidently. Cue your real estate agent—this is when they really come in handy. One question you should ask when negotiating the sale price is how long the house has been on the market. Typically, the longer it’s been on the market, the more eager the seller is to sell. This gives you leverage to ask the seller to drop the price, throw in a home warranty, cover closing costs, or provide a seller’s credit. If you’re not sure what to ask for, your real estate agent can help.
- Don’t let it go to your head. All this negotiating power will only take you so far. Don’t forget that the seller still wants to get a good deal and will take a better offer if one comes around. So stay within your budget, make a solid offer, negotiate where you can, and be content to move forward if your offer is rejected.
Take the First Step
There you have it. When it comes to house hunting, knowing if you’re in a buyer’s market vs. a seller’s market is crucial. And whichever market you find yourself in, we can help you with the financing you need. Start by getting a free rate quote and let’s get you home.