What is a Buyer's Market?
In real estate talk, you'll frequently hear the terms Buyer's Market, Seller's Market, and Stable Market. In this post, I'll explore what is meant when we say that the real estate market is a Buyer's Market.
A Buyer's Market is a real estate market whereby the inventory of homes on the market is greater than the number of active buyers seeking to purchase a home.
If there are 50 houses on the market in your town, and 10 houses have sold in the past three months, then you are in a buyer's market. At that rate of sales, it will take over a year for the current inventory to be depleted. There is an imbalance of properties available compared to buyers.
What does a Buyer's Market mean for buyers?
Usually, it means that buyers will have wide selection of homes from which to choose. It may also mean that home prices are lower. Based on the principles of supply vs. demand, smart sellers will use a competitive pricing schedule to lure buyers away from other properties.
In the past couple of years, buyers have also had a perk in the form of low interest rates for mortgage financing. So in addition to a greater selection of homes at lower prices, the buyers have been able to obtain financing at rock-bottom rates.
Does a Buyer's Market Mean You Can Get Anything You Want?
One mistake that we see buyers making in a buyer's market is lowball offers on properties that are already priced at market value. Also, we'll see buyers demanding the sellers make every repair noted on the home inspection, or upgrade finishes in the house.
I must issue a word of caution here: A Buyer's Market does not mean that you will be able to purchase a home for 50% its market value. A Buyer's Market does not mean that sellers will meet every demand that you make. In a Buyer's Market, you still want to negotiate with the seller to make an offer that they will find irresistible.
How to Make a Buyer's Market Work for You
If you are purchasing in a Buyer's Market, the top steps you can take to make the market work for you are:
1. Hire a REALTOR who will work as your designated buyer's agent
2. Ask that your agent help you determine whether the home you want to buy is over-priced, under-priced, or at market value.
3. Work with a mortgage pro who will keep you up-to-date on mortgage interest rates.
4. When you find a property you love, be ready to make an offer. Discuss with your agent your negotiating strategies before your offer is submitted. Make sure your agent knows the price that you are willing to pay, as well as your optimal timeline for the purchase.
5. Make an offer that a seller will have difficulty refusing. An offer loaded with congtingencies will be rejected, even in a buyer's market.
6. Decide whether you are buying a home, or an investment. Many buyers make the mistake of trying to work a deal like an investor, and they end up botching the deal and missing a great opportunity.
A buyer's market is about high housing inventory and its related effect on price. Watch the market carefully, gather a trusted real estate agent and mortgage pro to help you, and you will find yourself benefiting from purchasing during a buyer's market.
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Text and photos copyright Kathryn J. Acciari unless otherwise noted.
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Kathryn Acciari, RSPS, SRS, RESE, CFA
Century 21 MetroWest
45 Lyman Street Suite 14
Westborough MA 01581
Serving the Route 9/20 Corridors of Central Massachusetts
Sturbridge to Westborough
Cell: (508) 982-0686