Buyer’s Market vs Seller’s Market Explained
What is the difference between a buyer’s market and a seller’s market? A buyer’s market is when the buyer has the advantage and leverage in negotiations versus when the seller has the advantage and leverage.
In a buyer’s market:
1) Increased inventory – More homes to choose from for buyers
2) Time on the market – Homes take longer to sell in a buyer’s market
3) Decreased competition
4) Lower price in a buyer’s market
5) Buyer negotiation power goes up
In a seller’s market:
1) Decreased inventory – There are fewer homes to sell and more buyers than homes available
2) Less time on the market – The buyer has less time to complete due diligence
3) Increased competition – Buyers are competing for the same homes
4) Higher prices in a seller’s market – Competition drives the price up
5) Increased leverage for the seller and decreased leverage for the buyer – Difficult for the buyer to get desired terms
Hey y’all, Zach McDonald, your real estate agent with Real Property Associates. And in today’s video we’re gonna talk about the difference between a buyer’s market and a seller’s market. A buyer’s market traditionally is when a buyer has the advantage and also the leverage in negotiations, whereas a seller’s market is traditionally when a seller has the advantage and the leverage in negotiations. And we’re gonna talk a little bit more about what this looks like coming up in a buyer’s market. You’re gonna first off have increased inventory. You’re gonna have more homes on the market, more homes to choose from, and there’s also a greater supply of homes. So there’s just a lot more houses on the market than there are buyers in the market, which makes the buyer’s market to start with the supply and demand starting to work in the buyer’s favor versus the seller’s favor.
And second thing we’re gonna look at is time on the market. Typically in a buyer’s market, because there are more houses than there are buyers homes take longer to sell, which is nice for buyers because they have more opportunity to go and look at houses, do your due diligence. You don’t have to rush into a purchase. Sometimes in a seller’s market, you see people jumping into houses, looking at ’em the same day, making an offer the same day. In a buyer’s market, you don’t have to worry about that. You have the opportunity to take your time, sleep on it a couple nights, and then make your decision of whether you want to move forward or not. In a buyer’s market, you also, number three, have decreased competition because there are more houses on the market and fewer buyers. You don’t have to compete with buyers as often for the same house, which again, gives you more leverage and more of an advantage when it comes to negotiations with the seller.
And the thing that people think about when they think of a buyers and sellers market is, you know, what can I pay for the house? Right price? And that’s the other factor here. Number four, the price in a buyer’s market is typically lower than in a seller’s market. So in a buyer’s market, you have the opportunity to usually negotiate the price down a little bit. And number five, get more favorable terms in the contract. So number five is buyer negotiation. Power goes up and in the negotiations that comes down to price. It also includes the terms in the contract. Maybe you can negotiate for some closing costs to be paid by the seller or have a lower earnest money deposit. You might also be able to include more contingencies in your contract and protect yourself in more ways than you would be able to in a seller’s market. And you also have the opportunity to negotiate the inspection afterwards. You get to do your due diligence and then potentially ask the seller to take care of some inspection items. Let’s contrast a buyer’s market with a seller’s market. In a seller’s market, you’re going to have decreased inventory or supply of homes on the market. This means that there are fewer houses to sell and typically there’s also more buyers in the market than there are houses available. So it means that buyers do not have the opportunity to choose from as many options. And it also means that there are the same buyers competing for the same houses a lot more often than you would see in a buyer’s market. So typically in a seller’s market, you see a lot more of a frenzied pace, and that’s where we talk about time, which is the second thing that’s different in a seller’s market. In a seller’s market, you have less time or decreased time on the market. What this means is for sellers, it’s great. You can sell your house quicker.
It’s a lot easier to sell your house because you have less inventory on the market competing for the buyer’s attention. And for the buyer, this means you have less time to go see the house and to do your due diligence. So it’s a little bit more of a hurried process. And in Seattle, that’s what we’re finding ourselves in right now, is a seller’s market. And we’ve really been in a seller’s market for a long time, really, really long time. But coming out of the great recession and having a lot of more inventory in the market, more of a buyer’s market, it’s been quite a long run here. Now, on the opposite side of the spectrum, on this seller’s market side, the third mark of a seller’s market is going to be increased. Competition don’t make sense that you have fewer houses on the market, more buyers, and they’re all competing for the same homes.
You’ve got a lot more head-to-head battles for the same house. So whereas in a buyer’s market, there are a lot more houses to choose from. In a seller’s market, there are a lot less houses to choose from. So people are competing for those same homes, which is ultimately number four. What drives the prices up in a seller’s market. So whereas in a buyer’s market, you have the opportunity to potentially negotiate the price down and get a better deal for yourself. In a seller’s market, the leverage is in the seller’s hands. And if multiple people are trying to buy the house, there’s not any leverage to drive the price down. And what happens is the prices typically go up. So instead of seeing 5% discount, let’s say you’re gonna see a 5% addition. So you see the price and it’s more of a starting point than actually an ending point. You see that price on the buyer’s side, you think, oh, I can get it maybe for a little bit less if it’s been on the market for a little bit of time. In a seller’s market, it’s the opposite. It’s competitive. Multiple people want it, and you’re usually gonna be paying more than the asking price to get the house. The fifth mark here of a seller’s market is increased leverage for the seller and decreased leverage for the buyer. And what this means is that in those
Negotiations, you’re gonna have a lot more difficulty having a contract that’s favorable and in your desired terms. So price, typically you’re gonna pay a little bit more to get the house versus getting a discount. You’re also going to typically include terms in the contract that the seller wants to see versus the terms that you want to see. You’ll also likely be doing an inspection prior to your offer versus after, which removes any kind of negotiating with the seller over the inspection report or any items that may be need to be repaired. And it also removes potential, potentially removes contingencies from the contract as well. Things that you in a normal market ideally, would include in your contract. Some buyers with the understanding of what they’re getting themselves into will potentially remove contingencies like a financing contingency or an inspection contingency. And I talk about contingencies and things like this in a separate video.
And if you’re curious, how do I be competitive in a seller’s market? I have another video for that that I’ll link up below in the description so you can check that out because I do have tactics for that. And there are also tactics for negotiating a less competitive situation. But I think more often people are finding themselves in these competitive situations these days. So I hope you found this helpful, kind of comparing a buyer’s market with a seller’s market. If you find yourself as a buyer, ideally you wanna buy in a buyer’s market, right? And if you’re a seller, ideally you wanna sell in a seller’s market. But what I found is it’s so, so hard to time the market. If you’re a buyer, it might be years until you see another buyer’s market. And if you’re a seller and you’re ready to sell and it’s a buyer’s market, it might be years till you see another seller’s market.
So I think each side, if you’re a buyer, a seller, you need to weigh your situation individually. And it’s different for everybody. but specifically I think time in the market, you’ll hear this in a lot of places, time in the market, it’s going to be timing the market. And if you’re a seller and you know already what you’ve got, you know, you have a little bit more of an opportunity to just decide to get out, right? You can know what your take home money’s gonna be. And in a seller’s market, it’s really nice because usually you’re able to walk away with more and also have that competition giving you better terms as well. Thanks so much for watching this video comparing a buyer’s market with a seller’s market. If you made it all the way to the end, I know you found this video valuable, so please consider subscribing to my channel so you can see other videos like this. And if you know somebody who could benefit from this content, please consider sharing it with them.