Seller’s Market: A Complete Guide To What It Means In Real Estate
From year to year and even month to month, the housing market can change – sometimes dramatically. During this process, conditions can shift in favor of the seller or the buyer.
If you’re interested in the real estate market, you may have heard the term “seller’s market.” That means the scales tip in favor of sellers due to low inventory and high buyer demand. While that makes the market harder to navigate for buyers, it’s not impossible to navigate. Rather, it may just require a bit more research and strategy.
Here’s what you should know about a seller’s market and how it can impact you if you’re selling or buying a house.
What Is A Seller’s Market?
A seller’s market is when there’s a shortage of properties for buyers and sellers have more control. As a result of the intense competition among buyers, it’s common for bidding wars to start up. This, in turn, drives up the sale price and usually gives the seller more negotiating power.
Buyer’s Market Vs. Seller’s Market
Similar to how a seller’s market puts sellers at an advantage, a buyer’s market helps the buyer. That’s because this market features more supply than demand. As a result, buyers have their pick of houses while sellers compete with each other.
One of the major perks of this climate for buyers is increased negotiating power. Buyers will likely be able to purchase a home for much less than a seller’s market would demand. In addition, buyers are empowered to request seller concessions, which may include the seller paying all or some of the closing costs.
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Is It A Buyer’s Or A Seller’s Market Right Now?
The state of a housing market usually depends on supply and demand for a specific area. However, for the most part, the U.S. housing market has been a seller’s market since the start of the COVID-19 pandemic.
The good news for buyers is that some evidence suggests the market will soon begin to tilt at least somewhat in the buyer’s favor. However, a dynamic switch to a complete buyer’s market may not happen anytime soon.
You can usually tell if you’re in a seller’s market based on certain signs, such as:
- Limited options
- Homes selling quickly at a high price
- Bidding wars
Selling In A Seller’s Market
A seller’s market in real estate is the best climate for someone selling a house. But that doesn’t mean selling a house will magically become easy. You’ll still need to strategize if you want the best offers.
Tips For Selling In A Seller’s Market
If you’re a homeowner looking to sell your home in a seller’s market, here are a few tips that could help the transaction run a little bit smoother:
- Improve your curb appeal. If the property looks like it’s in poor condition or lacks visual care, you might lose buyer interest. It’s important that your curb appeal is strong before listing the home.
- Enhance your listing. Before you take your listing photos, be sure to spruce up both the home’s interior and exterior. This will also help when you start to have open houses.
- Time your listing. Generally, Thursday or Friday works best when listing a home. This helps ensure the property is at the top of a buyer’s list for any weekend walkthroughs.
Weigh your options carefully once offers start rolling in, too. It might be tempting to go with the first highest bid. But you need to consider each offer for any potential challenges, like seller concessions or how the purchase is funded.
Buying In A Seller’s Market
Wondering if you should buy a house in a seller’s market? Buyers typically have greater challenges in a seller’s market. You’ll likely face heavy competition, and your first bid may not be your last. This is why it’s important not to get too attached to a property.
When buying a house in a seller’s market, make sure you stay within your budget. A good real estate agent will help ensure you set yourself up for success in this regard. They should also offer additional buying guidance, help with negotiations and assist in the transaction.
Even in a seller’s market, it’s possible to find houses that have been on the market too long. Sometimes it’s because the asking price is too high or the property needs significant upgrades. In either case, you may be able to swing in and negotiate a more affordable asking price without heavy competition.
Tips For Buyers In A Seller’s Market
Seller’s markets can be tricky to navigate for buyers, and multiple offers on a home can lead to an all-out bidding war. But there’s a line between a competitive offer and a financial mistake. So, it’s vital that you carefully consider your offer before making it.
Here are a few tips on how to win in a seller’s market:
- Work with a real estate agent.
- Offer above the asking price.
- Make your strongest offer first.
- Look for under-budget homes and bid up.
- Add an escalation clause.
- Get a mortgage preapproval.
- Put down a strong earnest money deposit.
- Pay with cash.
- Offer non-price contingencies.
- Expand your search.
- Save money to cover the appraisal and sale price difference.
The Bottom Line
Whether you’re buying or selling a home, a seller’s market will impact how you navigate the real estate market. For buyers, it may mean greater competition, higher selling prices and fewer options. Meanwhile, sellers should be aware of how their home compares to the fair market value and weigh their offers carefully. As noted already, the best offer may not necessarily be the highest bid.
With the arrival of summer 2023, most of the U.S. remains a seller’s market. That could soon shift, however, depending on a variety of factors. Keep in mind that market shifts happen semi-frequently, so it’s important to stay on top of prices, trends and any other changes that might affect you during your buying or selling process.
If you’re ready to embark on the home buying journey, we can help you get started. Speak with one of our Home Loan Experts today!