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Buyer Vs. Seller Market

What is a Buyer’s Market Vs. Seller’s Market

Current events and market trends will direct the housing market to be either a Buyer’s or Seller’s market. The Housing market is a strong indicator of the strength of the economy. When developers are building homes and buyers are seeking to purchase homes the economy will become strong bringing in business into a community strengthening the local property value and job market.  On the other side of things, when the housing market is slow and less individuals are seeking to obtain a home it is a sign of a poor job market and other economic struggles.

When is a good time to buy a home

The fluctuations with the real estate market has to do with supply and demand. Season will have little to do with the market when it comes to prices of homes. To get a little of an idea of the housing demand you can take a look at your own neighborhood and gadge it by how many homes are listed for sale and how fast those homes are selling.

Buyers Market

When supply exceeds demand and available real estate inventory is high with plenty of homes for sale home buyers are in a buyers market.  These market conditions make buying favorable for buyers by giving them more leverage over sellers to negotiate home improvements, prices, and closing cost.

In a buyers market homes sell slower then they would in a seller’s market. To prevent the home from lingering on the market for too long homeowners will have to compete against other homes for sale.

Buying Power

Contingent offers are more acceptable.  When a buyer is also a seller they may need to close on their current home first and use their proceeds towards the new home they plan on buying.  This is called a contingent offer and sellers are more likely to accept this type of purchase offer in a market as a way to prevent the home from lingering too long on the market.

During a Buyers Market it is common to see seller concessions being offered.  This is when a Seller pays closing costs up to 6 % a  buyer who puts a  down payment of 10% – 25% . Seller concessions are applied towards property taxes, attorney fees, and or appraisal fees.

Seller credits for repairs are another benefit to buyers in a buyers market. Ask your realtor about the seller’s credit in case the home inspection reveals problems with the property. The type of repairs that sellers credit is used towards are typically larger repairs such as a roof, exterior paint, and fixing interior flooring.

The additional benefits of a Buyers Market is there is less competition and fewer bidding wars when putting down a purchase offer.

What a Seller’s market means for a home buyer

The signs of a seller’s market are very much the opposite of a buyer’s market. Supply to demand is short, home prices are higher, homes are moving quickly, and seller’s are choosing the highest bid and less likely to accept contingent sales or to offer seller’s concessions.

A buyer will have to move quickly when it comes to putting down an offer on a home. In some cases the buyer will be a part of a bidding war where bidding over the appraised value will win the home.  

Colorado and California have experienced this type of seller’s market for several years now. Lenders will only lend the value of the home based on the appraisal and some loans are unavailable if the home inspection lists damages and required fixtures.

How does a buyer purchase a home in such a tough market?

This is a common question and there are a few things you may do to become more competitive in such a seller’s market.

Getting pre-approved and a pre approval letter will be your first important step. This helps your realtor know how much home you are qualified for and where to start when showing you home listings. Make sure to have alerts set through email or an app with your realtor to act fast on new listings.

Do your due diligence on the housing market, homes can be selling for more than what they are being listed at as well as more than what appraisals are showing the homes valued at.

Have cash available, in seller markets where cash offers are making up for the appraisal value and purchase offer this will be a huge driving factor.

Buyers who are looking at homes below their qualified amount have an advantage to offer more on the home and have the difference financed as long as the home appraises for the difference or more. If the home does not appraise for the difference be prepared to pay for it in cash.

In some cases an emotional attachment letter can persuade a seller to consider your reason for purchase when competing in a bid war.

Put as much Earnest money down as possible to show how serious you are about buying the home. Earnest money is also known as “good faith money” and acts like a deposit on your purchase that will be applied to your purchase.

Talk to your agent about adding an Escalation Clause to your offer. The clause states as a buyer you will add a specific amount extra to your offer if someone outbids you.

Waiving certain contingencies will also increase your chances of having your offer accepted. Take note that waiving contingencies may take away some of your protection if something goes wrong with the property after possession. Waiving contingencies will mean as the buyer you may be purchasing a home that will require you to make some improvements on your own instead of request the selling to complete prior to you taking ownership.

Winning the Keys

Regardless if the market is a buyers or  sellers market a well prepared buyer and well educated buyer is more likely to succeed at purchasing a home they will be in love with.

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