Take Advantage of a Buyer’s Market5 Minutes
- Buyer’s markets exist when buyers have more negotiating power than sellers due to supply-and-demand imbalances
- There are several ways to figure out whether you’re in a buyer’s market
- If you’re purchasing in a buyer’s market, take strategic advantage by offering less than the list price and/or asking the seller for concessions
As you begin the process of buying a home, you might be dreaming of a home with more space and an excellent school district, or a compact loft in a convenient downtown hot spot. You probably aren’t dreaming about supply and demand and market dynamics.
But knowing whether you’re in a buyer’s market can help you make better decisions about timing and strategy as you look for the perfect place to call home.
What’s a buyer’s market?
A buyer’s market exists when buyers have more negotiating power than sellers.
When there’s a buyer’s market, there are more homes for sale than there are potential buyers. Because there is no shortage of options for the buyer, buyers can take more time to find the right home and sellers are forced to compete with one another, driving prices down.
Home prices tend to be lower and homes tend to sit on the market for longer before receiving an offer.
What creates a buyer’s market?
Any situation that increases the urgency of sellers to sell usually creates a buyer’s market. Usually, this is due to the supply and demand of homes on the market.
Many factors can affect supply and demand in real estate: economic recessions and high unemployment, declines in the local job market that cause people to move away, or overdevelopment.
How can you know if you’re in a buyer’s market?
Your real estate agent is an excellent resource for understanding the market, making the best possible offer, and negotiating the sale.
If you’re doing your own research, there are four things that suggest a buyer’s market.
- Homes consistently selling below list price
- Homes sitting on the market for a long time (weeks or months)
- Many homes being listed for sale
- Falling home prices
What should you do if you’re purchasing in a buyer’s market?
You can take advantage of market conditions to negotiate the best possible price on your new home. Consider the following strategies:
1. Offer less than the asking price
- Asking the seller to accept a lower price to close the deal is a great way to keep thousands of dollars in your pocket.
- How much should you offer? Consider how badly you want the home and how much you’d be willing to pay if you had no idea what the price was.
- If it’s the home of your dreams, you might not use this strategy, or only offer slightly below the list price. But if you have two other comparable homes waiting in the wings, you could come out way ahead.
2. Ask the seller to make repairs
- Another negotiation tool is requesting that the seller make certain repairs or improvements as a condition of the sale. Purchasing in a buyer’s market is a little like negotiating a job offer – if you can’t negotiate the salary, you can always request more perks, vacation time, etc.
- When you’re looking around the home, take note of any obvious issues you see, especially if they’d be projects you’d have to take on shortly after you buy the home to make it comfortable for your family.
- New carpet can be installed, leaks can be fixed, roofs in poor repair can be replaced. You don’t always need a home inspection to identify property defects. Getting the seller to fix obvious issues saves you the expense and headache of addressing those issues yourself.
3. Request seller concessions
- Did you really love the Speed Queen washer and dryer set you saw when you viewed the house? Do you need a weekend closing date because of your job? Maybe you don’t need anything special, but you’re wavering between two similar houses and one of the sellers is willing to cover your closing costs.
- These are all examples of seller concessions. Concessions can go toward specific expenses or represent a portion of the closing costs. This is different from a seller credit, which is money the seller offers to induce you to buy.
If you’re lucky enough to be house-hunting in a buyer’s market, the most important thing to remember is that you have options and bargaining power. You’re more likely to find a home that checks all your boxes, and to pay a fair price for it.
Thinking about what you can do with that spending power? We’d love to walk you through your buying options. Contact us today.