The real estate market is in constant flux, often switching between a “buyer’s market” and a “seller’s market” as we see changes in the economy, interest rates, election cycles, and countless other variables.
But what is the difference between a buyer’s market and a seller’s market, and what does that difference matter to homeowners and homebuyers?
The main difference between a seller’s market and a buyer’s market is who has more negotiating power during the sale. A seller’s market favors the seller; a buyer’s market favors the buyer. Curious if the market in your area is a buyer’s or seller’s housing market? Here’s how to tell the difference:
During a buyer’s market, the buyer benefits from a reverse of the supply and demand found in a seller’s market. Instead of there being a shortage of homes to pick from, there’s a surplus of available homes, which means you’ll generally see:
In a buyer’s market, the buyer has more influence over the transaction, and some sellers find it may take longer than usual to sell their home because there’s less competition in the market.
During a seller’s market, the seller benefits from a few variables working in their favor, many of which come back down to simple supply and demand. During a seller’s market, you’ll generally see:
During a seller’s market, buyers often try to become as competitive as possible, and they may even compromise on contingencies while offering top-dollar prices to stand out from the competition. Some buyers find they also need to look longer than usual to find the right house for themselves.
Is it a buyer’s or a seller’s housing market?
The housing market has favored sellers for over a decade, especially during the pandemic, when low inventory and high demand drove prices up. But now, rising mortgage rates (hovering around 7%) and an increase in active listings by 26% have cooled buyer activity, gradually reducing the competitive edge sellers once held. Learn more about the difference between these markets with our real estate blogs.
Here’s how to manage a buyer’s market no matter which side of the transaction you’re on:
Follow these steps to stand out as a seller:
Since there’s an oversupply of homes, setting an appealing price is essential. Pricing too high may lead to prolonged listing times, while a competitive price can attract more interest and possibly spark extra competition among buyers. Work with your real estate agent to determine a price that aligns with market conditions and comparable properties in your area.
First impressions matter. Boost your home’s curb appeal by maintaining landscaping, painting the front door, and tidying up outdoor areas. Small improvements, like adding new plants or power-washing the driveway, can make your property more inviting and memorable, even if the cosmetic enhancements don’t increase the home’s overall value.
To attract buyers, consider offering additional incentives. These could include covering closing costs, including a home warranty plan, or offering to cover some of the buyer’s fees. Incentives can make your property more appealing in a competitive market and help it stand out among similar homes.
Be open to negotiating. In a buyer’s market, buyers often expect some flexibility on price, repairs, or even closing dates. Having a willingness to negotiate can show buyers that you’re motivated to sell, which could lead to a faster, smoother sale.
In a market with abundant listings, your home needs to stand out. High-quality photography, virtual tours, and targeted advertising are excellent ways to reach a wider audience. Don’t just list on one platform—spread your listing across various channels to attract as many potential buyers as possible.
Here’s how you can elbow other buyers out of the way in a competitive market:
With more properties on the market, you have room to negotiate. Don’t hesitate to make an offer below the asking price, especially if the home has been listed for a while. You may be able to secure a great deal.
Don’t feel pressured to act immediately. Take time to carefully compare properties, evaluate different neighborhoods, and consider what best suits your needs without the fear of losing out to other buyers.
Ensure you’re making a solid investment by requiring a thorough inspection. Since you have negotiating power, you may also be able to get the seller to cover repair costs or lower the price if issues arise in the inspection.
While interest rates can impact affordability, the buyer’s market offers flexibility in negotiating with lenders as well. Look into various financing options, and don’t hesitate to ask for lower interest rates, assistance with points, or other financing perks that may be available to you in a favorable market.
Here’s how to manage a seller’s market no matter which side of the transaction you’re on:
The market’s in your favor here, so follow these proven best practices:
As a seller in a seller’s market, you may decide to list your house for slightly more than it’s really worth, and you’ll still likely experience a small bidding war that raises the price even further.
But don’t get greedy. Coming in too high could deter buyers from even considering your house as a viable option. Instead, talk to your real estate agent for recommendations on setting the best initial listing price.
A seller’s market thrives on limited supply, so the fact that your home is available is already a major selling point. But don’t miss the opportunity to list those bonus features that could make your home even more attractive to potential buyers.
For example, list any furniture or appliances you can leave behind, the cool creek at the edge of the property, or how the large nearby trees help keep the home cool even on the hottest
summer days.
You hold most of the negotiation power in a seller’s market, so don’t offer contingencies if you really don’t think they’re necessary or if they place you in an uncomfortable position.
When the market is competitive, buyers will look for creative ways to enhance their offers. Waiving contingencies, making an all-cash offer, offering a donation to your favorite charity—there’s no shortage of strategies buyers might use to become more competitive
Weigh these offers accordingly and see which one feels the best to you. It doesn’t always come down to the dollar amount!
As a buyer in a seller’s market, you have to become as competitive as possible. Here are some strategies to help you stand out:
A pre-approval letter isn’t a guarantee that you’ll have full access to a certain amount of money, but it does show a lender believes in your borrowing potential. And that can make you more attractive to sellers in a crowded market.
In a red-hot seller’s market, some houses receive multiple competitive offers on the first day they’re listed. If a home meets your criteria, don’t delay; act quickly.
Work with your real estate agent to make a swift, compelling offer that helps you stand out. Waiting for even a single day could cause you to miss out on the home entirely.
This one should be obvious by this point, but it’s worth calling out: If you want to be successful in a competitive market, you have to make competitive offers. In some cases, you may need to start off at 5%, 10%, or even 15% above the asking price to get noticed!
A real estate transaction isn’t all about the money. Most sellers have a certain level of emotional attachment to their homes, and they want to sell with the confidence that they’re passing their houses off to a good family.
Write a personal letter explaining what you love about the home and the hopes you have for living there—especially if you have a family. Tugging on the seller’s heartstrings could work in your favor!
Sellers may ask you to give up certain contingencies to make certain sacrifices in order to complete the sale. While you never want to be taken advantage of, consider these requests. The more amenable you can be as a buyer, the more attractive your offer becomes.
No matter which side of a buyer’s vs. seller’s market you find yourself on, a great way to stand out is by offering a year-long home warranty plan. At American Home Shield®, our home warranty plans offer affordable coverage for your home’s major systems and appliances. And making a warranty part of your overall offer can make the deal especially exciting.
We also offer an exclusive real estate partner program for real estate professionals. Check out our American Home Shield Real Estate Pro program to learn more.
AHS assumes no responsibility, and specifically disclaims all liability, for your use of any and all information contained herein.
