Seller’s Market vs Buyer’s Market: What’s the Difference?

One of the most common questions I get when working with new clients, especially first time home buyers, is “what’s the difference between a buyer’s market and a seller’s market?” These terms are commonly discussed when talking about real estate and have been particularly sensationalized on television. But while you may know them and have a general understanding of what they mean, the details of what makes these markets actually are may be a little less clear. So, let’s clarify that, shall we?

What is a Seller’s Market?

A seller’s market is when there are more buyers in the market than there are homes for sale. This means the demand for housing is higher than the actual supply of homes available, so sellers are at an advantage. They know that the need is there, so they can be more liberal with their pricing. The reality is that their house is going to sell—usually very quickly—and that there’s a higher chance they will receive multiple offers, giving them more power when it comes to negotiation, so it’s an excellent time for putting your house on the market.

Usually, you can tell when we’re in a seller’s market by looking at the trend in home prices and days on the market. When prices are up and the days on the market are low, it’s a great time to be a seller.

So what causes a seller’s market? Well, the most common driver for an increase in buyer’s is usually the local economy. When there are more jobs available, that will often attract more new residents, causing a surge in home buyers. But other influences toward a seller’s market include: lower interest rates attracting buyers or sudden spikes in interest rates pushing on-the-fence buyers to buy before prices go up even more.

What is a Buyer’s Market?

A buyer’s market is when there are more homes for sale than there are buyers in the market. The more selection the limited buyers have means a higher chance properties won’t be chosen, so sellers are forced to drive their pricing down to a more attractive number that can compete with the other properties available. This also gives buyers more power in negotiation, as they can always continue their home search elsewhere, so they can really get the most bang for their buck.

Signs of a buyer’s market can also be found by looking at the market trends for home prices and days on the market. When prices are down and the days on the market are high, it’s a great time to be a buyer.

A buyer’s market can be brought on by many different influences, including interest rate trends. Higher interest rates will limit the amount that lenders will offer buyers, thereby reducing the number of people in the market. New builds can also cause property prices to drop, increasing the supply before the demand is there, as well as natural disasters.

Tips for Working in the Opposite Markets

As much as it can be helpful to know what to look for to determine the type of market that your local real estate might be in, sometimes you don’t always have the option of waiting it out for when the market shifts. Financial or time constraints can often have you working in the opposite market—it happens! But that doesn’t have to mean you’ll be entirely out of luck. Here’s how to maximize your investment, even when the market isn’t quite in your favour:

Buying in a Seller’s Market

If you find yourself in need of buying in a seller’s market, you’ll be going up against a lot of other hungry home-seekers. Here’s how to stand out in the crowd:

Get pre-approved. While you might be anxious to start shopping before you miss out, I can’t stress enough how important it is to get pre-approved for a mortgage first. This shows sellers that a bank has already guaranteed you the lending amount you’ll need, so they won’t have to wait as long to hand over the keys!
Start with a strong offer. When the pickings are slim, there’s a much higher chance that any offer you give will be going up against at least one other, so you want it to be competitive. This is where working with a buyer’s agent can be extremely helpful, as we’ll be able to guide you on which offers will be most effective against the others.
If you like it, don’t wait. Houses in a seller’s market don’t last long, so if you’ve fallen in love with a house for sale, move quickly and don’t be shy about it.
Be responsive. Always be available to answer questions from the seller or your REALTOR® so you never miss out on an opportunity.
Be flexible. If a seller needs more time before move-in or is asking for other conditions, be willing to work with them.

Selling in a Buyer’s Market

If you’re stuck selling in a buyer’s market, your home is going to be compared to a lot of others. Here’s how to make your home stand out:

Know your competition. Have a good idea of what’s selling and look for common trends that you could apply to your home to make it more attractive.
Make sure the price is right. Money talks and when buyers have the power, you want to be the one offering them the best deal. Get a reliable home evaluation done and keep in mind that your home is only worth what someone is willing to pay.
Be flexible. If a buyer wants a quick possession or other reasonable conditions, do your best to work with them.
Consider every offer. It’s important to remember that every offer might be the only one you’ll see for a while, so take each one seriously. This is where an expert real estate agent can be a huge help in assisting you with weighing the pros and cons to make the decision to reject or accept.

If you’re considering entering the market as either a buyer or a seller, it’s important to know which kind of market you’re working with. Know the signs for each and keep your eye out so you can jump in at just the right time. And if you’re worried you won’t be able to tell when the time is right, don’t be afraid to reach out! I’m always more than happy to watch the trends for you and help you make the best decision in buying or selling any time of year!