What Is a Sellers Market?

What Is a Sellers Market?

By Dori Zinn

Knowing whether it's a buyers or sellers market can make a big difference whether you are buying or selling a house. Here's what a sellers market is and how to tell if it's the right time to buy or sell.

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Whether you’re buying or selling a home, it’s important to know if the market is in your favor. Knowing the difference could mean how much you make—or spend—when it comes to homeownership.

So, what is a sellers market? While a buyer’s market is great for those who are looking to buy a home, it’s not always good for sellers. If you’re considering selling your home, try to make sure you know what a seller’s market is, how to know if you’re in it and what to do if you aren’t.

How a seller’s market works

A seller’s market refers to more buyers looking for homes than available homes for sale. Demand outweighs supply, which can drive up the price of a home that’s for sale—especially if many buyers are interested in one property.

If you’re selling your home, being in a seller’s market means you could stand to see the price of your home increase. You may have many potential buyers looking to buy your home, and that could mean it goes to the highest offer.

This isn’t a great deal for buyers. Fewer homes for sale means the cost of the houses that are on the market could go up. If you don’t have the extra cash to afford a home at a higher cost, you could miss out on buying a home you like and can afford.

For home sellers, being in a seller’s market is good for your bank account. The higher the demand for your home, the more you’ll be able to earn from the sale of your home.

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Seller’s market vs. buyer’s market

If you’re buying a home, a seller’s market won’t be good for you. If you’re selling a home, a buyer’s market isn’t your friend. Here’s the difference between a seller’s market and a buyer’s market:

Chart showing sellers market vs buyers market differences

Seller’s market: pros and cons

Pros of a seller’s market

  • Quick sale: In a seller’s market, your home won’t stay on the market for long. Expect a speedy sale for buyers who want your property.
  • High-price sale: Whether you bought your home for a lot or a little, a seller’s market means you can sell your home above market value, and possibly for much more than you paid for it.

Cons of a seller’s market

  • Restricted access: If you’re renting or looking to buy a home, you may end up renting your current space for longer. A seller’s market is sometimes referred to as a renter’s market since it might force potential buyers to stay where they’re at longer.
  • No haggling for buyers: For potential homebuyers, don’t expect to pay what you’d like. Instead, you’ll need to be prepared to bid higher than others for a home.

Buyer’s market: pros and cons

Pros of a buyer’s market

  • Negotiating power: For buyers, you have the chance to buy a home for much less than the asking price. Good news for potential homebuyers who wouldn’t otherwise be able to afford to buy a home.
  • Plenty of options: If one home doesn’t work out, or needs more work than you can manage, you can browse through other homes on the market, since supply outweighs demand.

Cons of a buyer’s market

  • Long market stay: For sellers, you might have your home on the market for much longer than you were expecting. This could hurt your finances if you’ve already bought another home and have to pay two mortgages at once.
  • Low final price: For sellers, you might end up selling your home for much less than you expected. This could crush what you potentially earn on the home and you might even sell for less than what you owe.

How to try and take advantage of a seller’s market

For sellers who want to earn the most, you’ll need to act soon. Once enough homeowners catch on to a seller’s market, it means it could get saturated fast. Here are some things you can do that may be able to help.

  1. Clean your home. More than sweeping and mopping, you’ll want to have your home squeaky clean for photos and open houses.
  2. Finish projects. Complete paint touch-up or little repairs before your home goes on the market.
  3. Hire a Realtor. An experienced Realtor will know your neighborhood enough to not only help you sell, but at a price you’re happy with. They’ll be able to research comparable homes to see what you’re up against and advise you if your home needs any maintenance or upkeep before selling.
  4. Sell slightly below market value. In a seller’s market, the demand is high. If you get in early and lower than other homes in the area, you could have many offers on your home. This can cause the price to go up much higher than if you were to originally list it higher.
  5. Don’t wait too long. The faster you can sell your home, the more money you stand to make in a seller’s market. If you wait too long to handle home improvements or stage your home for photos, you might miss the seller’s market. When enough homes go on the market, the supply and demand shifts, becoming a buyer’s market.

How to buy a home in a seller’s market

If you’re on the hunt for a home, you might not be in the best position to buy when it’s a seller’s market. But there are some things you can do to try and prepare yourself for it.

  1. Be patient. You’re going up against many buyers at once—sometimes for the same house. Don’t feel you need to buy the first (or second, or third) house you see. Acting too fast might mean paying more for a house you can afford or finding major home problems later on that you didn’t notice at first.
  2. Be prepared to pay more. If you have the wiggle room in your budget, you can expect to use it in a seller’s market. You might need to increase your down payment, get a conventional loan or in some cases, pay in cash.
  3. Be prepared to wait it out. If you’ve been saving your money, paying off debt and building up your credit score, you may finally be ready to buy a home. But if it’s a seller’s market, you might not be able to afford it after all. Don’t be afraid to wait a little longer—it could be the difference in buying a home you can afford versus over-paying.

Bottom line

While a buyer’s market is great for potential homeowners, it’s not good for current homeowners who are looking to sell their homes. Luckily, the market can shift and go from a buyer’s market to a seller’s market faster than you think. But keep in mind, it can also shift back just as fast.

For sellers, wait until the market is in your favor to list your home. The best time to sell is when you’re set to earn more than you paid and more than market value. If you can stay put for a while, you should.

Disclaimer: The above is solely intended for informational purposes and in no way constitutes legal advice or specific recommendations.