If you know any real estate agents, and everyone does, you’ve probably heard them refer to buyers’ markets and sellers’ markets. What do these terms mean, and what’s the difference?
The type of market is determined by how many homes are on the market compared to how many homes sell in a single month. As you might imagine, this ratio changes often and varies by geographic location.
A Buyer’s Market: More Houses than Buyers
In a buyer’s market, the inventory of houses for sale on multiple listing services (MLS) is greater than the number of people looking to buy a house. This means that houses could be on the market for 7 months or more waiting for the right buyer to come along. When that buyer does appear, he or she may have the upper hand in negotiations. This will depend on the agents and the seller’s motivation level.
If the sellers are in a hurry to get out from under the home, they may offer assistance with closing costs or take a lower price offer on the property. Each party should have an agent representing their best interests. The seller’s agent may advise against taking a below market value offer on the home, even if it means waiting longer to sell the house. Agents are looking at many data points other than just the final sale price on this one home. An experienced agent is looking at property values in the neighborhood, watching market trends, considering the inspection and appraisal aspects of the sale, and protecting their long term relationship with the client.
Good real estate agents make sure that the negotiated price is fair and realistic for both buyer and seller, despite which one they represent. Don’t forget, the two agents are likely to meet again in the future as they represent other clients, so they should also be mindful of building an ethical and communicative reputation.
A Seller’s Market: More Buyers than Houses
If a buyer’s market gives buyers the edge, it only makes sense that sellers tend to have the advantage in a seller’s market. In a seller’s market, the inventory of houses is low compared to the number of people looking to buy. Houses are likely to sell in less than 3 months. In this kind of market, the list price on the home becomes a minimum bid, and it will often settle above that.
In a seller’s market, which we continue to be in here in Montgomery and Bucks Counties as we enter the 4th quarter of 2021, it can seem like a bit of a feeding frenzy when a new home comes on the market. We’ll host anywhere from 25 to 60 or more showings in a single weekend, and the sellers will receive multiple offers by the end of it. Should each seller automatically take the highest offer? Not always. This is where you need an experienced, full-time agent.
When we look at the flood of offers coming in for a client’s home, we use a process to locate the quality offers. We make sure the buyers are qualified to purchase the home, look at whether or not they are waiving inspections, check the reputation of their agent, and consider a few other factors that vary from case to case. Our goal in representing a homeowner is to make sure they accept the offer that is going to get them to a successful settlement. That doesn’t always mean taking the highest bidder. The best buyer is conscientious about this investment and makes a serious offer with reasonable expectations.
Some homeowners believe that in a seller’s market, they can stake a For Sale sign in their front yard and just wait for the offers to fly in. This isn’t really the case. We advise clients to maximize their profitability by making sure the house is show-ready. Even in a seller’s market, repairs must be made, paint must be updated, staging must be done, and the pictures have to be amazing. Preparing the house in the right way will set it up to sell at or above market value to serious buyers.
To help buyers in a seller’s market, we counsel clients not to ratchet up their offer or waive inspections to be more competitive. Even though the house may seem to be everything they’re looking for, we need to make sure it’s not going to end in disappointment. The house still has to measure up in terms of neighborhood, structure, and appraisal before we let clients make a commitment they can’t pull back.
Stable Market: The Great Equalizer
In a stable housing market, buyers and sellers are on relatively equal footing. Houses sell in a few weeks to a few months, buyers have plenty of choices, and negotiations range from one sale to the next depending on everyone’s priorities. There is competition in the market, but everything depends on each buyer or seller’s motivation.
In a stable market, having a full-time agent is vital. There’s enough activity that you could miss out on an opportunity if your agent has a day job and can only schedule a showing on nights or weekends. Also, part-time agents may not be as attentive in a stable market. A full-time agent is always ready to do the work to meet client needs, and we are able to focus fully on the job at hand. As this current market begins to stabilize towards the end of 2021 and heading into 2022, it’s important to consider your home buying or selling interests and ask which of your real estate contacts is committed to putting your needs first.
At 1SlickHome.com and The Geoff Slick Team, we represent both buyers and sellers with exceptional, personalized service. Contact us to learn more about how we can help you achieve your real estate goals. We serve the western Philadelphia suburbs, including Souderton Area School District, North Penn School District, Quakertown School District, Pennridge School District, Central Bucks School District, and more!