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What’s the difference between a buyer’s and seller’s market?

On Behalf of | Apr 12, 2022 | Real Estate |

Those interested in buying or selling real estate will inevitably run into the terms “buyer’s market” and “seller’s market.” They may even understand that the buyer’s market favors the buyer and a seller’s market favors the seller. Less obvious are the factors that determine the market, but understanding those terms helps understand the process and the outcome of the transaction, whether it is a house, condo, commercial space, or investment property.

A buyer’s market

Several factors add up to a buyer’s market. These include:

  • There are more properties for sale than there are buyers
  • Similar properties (size, price, type, location) are abundant
  • The properties on the market stay there for a longer period

A buyer’s market allows the buyer to take their time and shop for just the right property. It may even enable them to negotiate a lower price or secure other desirable concessions (such as repairs or updates) before closing. On the other hand, buyers may need to acknowledge these conditions and be willing to accept their disadvantage if they need to sell and price the property at a more competitive price.

A seller’s market

This weighs many of the same factors but with a different outcome:

  • There are more buyers in the market than sellers
  • There are few properties available in the category that the buyer seeks
  • Properties sell in a day or a short period

The seller’s market allows the seller to have more control of negotiation on price, and they may even receive offers for more than the asking price. Moreover, the property may get multiple offers that escalate into a bidding war. The multiple offers also enable the seller to pick the buyer, perhaps with more reliable financing, even if the offer is for less money.

Determining the market

Buyers and sellers can do research to see what properties similar to their interests sold for, how quickly they sold, and the availability of housing stock. A knowledgeable realtor who works in the community where the property is located or the buyers are shopping can assist in determining good deals from the bad. However, real estate attorneys can also step in to help negotiate the price and conditions of the sale, draft purchase agreements, address title issues, structure financing, and handle other crucial details.