Can we start by talking about the elephant in the room? This topic is confusing. Most people in the industry use the terms “buyer’s” or “seller’s” market to manipulate their own agenda. It’s common to have someone give you advice that helps their commission. Often they lace their advice with these terms to help give them more authority.
I could make this blog detailed, going on about supply and demand, or illustrating my points using bell curves. I could even talk about various economic theories. But that isn’t going to help. The reality is, understanding a true buyer’s market and a true seller’s market is simple.
Buyer’s Market
Most people want the same thing when it comes to an ideal buying experience:
- Options
- Below market price
- Smooth and simple transaction
In a buyer’s market these factors are all happening. As a result, you have several homes and neighborhoods to choose from. Because there are many houses on the market, sellers have to compete with each other to ensure their home has a better chance of selling. They make their home more attractive to buyers by keeping the price low and agreeing to certain terms to make the transaction easier for the buyer. In a buyer’s market it’s not uncommon to see home prices below market value or to see sellers agreeing to pay fees that the buyer would typically cover.
The bottom line: in a buyer’s market, the transaction favors the buyer. They have more options, better prices, and sellers make concessions to appease the buyer.
Seller’s Market
Using the same logic as above, what are the things most people want in a selling experience?
- Options
- Above market price
- Smooth and simple transaction
In a seller’s market, typically all of these elements are happening. The seller has a lot of offers for their property. As a result, they can pick and choose which one they like best. Because the buyers know they are competing against multiple offers, they may be willing to pay above market price. In addition, buyers might do things throughout the process to make it easier on the seller.
The bottom line: in a seller’s market, the transaction favors the seller. They have more options, receive better offers, and buyers make concessions to appease the seller.
Beware
As a whole, buying or selling a home based on market conditions (a buyer’s market or seller’s market) is not wise. Trying to time the market is a poor strategy and not something you can control. Real estate investors are the only ones who should have a hyper-focus on market conditions.
PRO TIP – Control the controllables. Focus on your income, how much you can save, and how much you are spending. Don’t worry about market conditions. You buy a or sell a home when it makes sense for you and your family, both financially and in life. If a realtor or mortgage professional tries to convince you to make a major real estate decision because it’s a “buyer’s market” or “seller’s market,” RUN!
If you would like to chat with a wise Financial Planner about your situation, and whether it’s the right time to buy or sell, schedule an appointment below. We would love to sit down with you and evaluate your finances holistically and provide you with a Financial Plan.
