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Buyer vs. Seller

Jan 7, 2019

Q: Julie, why do we say buyer “versus” seller like it’s a boxing match?

A:  Because it kind of is.  Simply put … market conditions that make it good for Home Buyers make it not so good for Sellers.  And vice-versa.  That’s why it’s critical for both buyers and sellers to know what kind of market they are entering BEFORE they buy or sell a home.  So how do you tell which kind of market it is?  Let’s look at some indicators you and your real estate professional should review to identify exactly what kind of market is out there before you take the plunge.

Things to watch for…

Mortgage Cost:
What’s the cost of money?  Are conditions for obtaining a mortgage easy or hard?  Are banks and lending institutions ready, willing and able to lend money for home purchases at reasonable rates?  Or are they being tough with their loan approval criteria and turning down more applications than they accept.

And what’s the interest rate barometer reading?  Is it going up or down?  If mortgages are easy to obtain and interest rates are reasonable, more Buyers will be hunting for homes and that gives Sellers an advantage in the market.  If loans are hard to come by and interest rates are rising, Buyers who have the cash or a pre-approved loan are in the driver’s seat and will get better home choices with many Sellers vying for their attention, offering lower prices and negotiable deals.

Home Inventory Levels:
Supply and Demand rule remains true everywhere.  How many homes are for sale in the market?  If there are tons of homes for sale then Buyers benefit with lower pricing and better choices.  If the opposite is true … more Buyers than homes listed … the Seller benefits receiving more offers and higher prices for their homes.  Simple rule of supply and demand.

However, it’s not just the total home inventory available in a marketplace or town.  The inventory level within a segment of that market is just as important to evaluate:  homes in a particular price range (e.g. under $350,00);  or a particular neighborhood;  a home size (e.g. 2, 3, or 4 bedroom requirement);  homes within a school district, etc.  All these Buyer criteria impact the available inventory level in a market segment and could change what was a general Buyer’s market into a Seller’s market in that particular category.  Imagine for instance you had a large family and need four or five bedrooms.  But you’re looking for a home in a neighborhood where most were constructed for downsizing retirees or vacationers.  There may be very few homes the size you need in that particular market segment.  And with only a few available, the Seller is in charge.  Conversely, if ALL the homes in a market have 4 or 5 bedrooms, Buyers have great choices and will be able to negotiate a better price.

Competitive Situation:
Sometimes Buyers can have dramatically different reasons for buying but will wind up competing for the very same homes.  An example of this is when “first time” homebuyers, retirees/down-sizers and income property buyers all are looking for the same home in the market.  A smaller, 2-3 bedroom home fits the criteria for all three Buyer types.  First-timers want a smaller home because it’s what they can afford.  Retirees or down-sizers want this home because it physically fits with their diminished space and upkeep needs.  Income property seekers want this home because a smaller home is easier to rent and repair/-maintenance costs are lower.  All three Buyer groups are looking for the same size home.  That makes it a Sellers’ market providing a quick sale, at full price, or perhaps even more if a bidding war occurs among these Buyer groups.

Conversely, Sellers too often have similar reasons for listing their home.  For instance what if a majority of homeowners in a family neighborhood … approximately all in the same age group … become “empty nesters” with grown & gone children in the same 3 – 5 year period.  They don’t use the school system anymore and don’t need the living space of their larger, family home.  So all want to downsize and get out of their big 3 to 5 bedroom homes essentially at the same time.  Buyers who need these larger homes for their growing families now have great choices and negotiating power.  That means Sellers now must be flexible, do fix-up/repairs and be prepared to reduce pricing to complete their sale … or some other Seller who does will get the deal.

Market Trend Areas:
Interestingly enough, there are actually a number of residential market areas in the USA that have always been the general bell-weather for identifying market conditions.  These areas consistently reflect whether it’s a Buyers’ or Sellers’ market throughout the nation.  Real Estate professionals keep their fingers on the pulse of these markets to confirm which market trend is here or will be coming to their market very soon.

Southern California, Las Vegas-Nevada and Michigan are three of these areas that statistically reflect the home buying/selling atmosphere across the nation.  Check them out or have your Real Estate professional show you the statistical trends in these markets.  What’s happening with home sales there is happening (or will be happening soon) in your market.

Now or Later:
Timing is everything, right?  Both Buyers and Sellers have to evaluate the timing of market shifts and ask themselves a couple of key questions based on what market conditions prevail.

What will it cost me to NOT buy or sell a home now?

What will I save or lose if I wait?

After you and your Real Estate professional have checked mortgage costs, evaluated home inventory levels, seen what kind of homes people are buying, what kind they’re passing up and checked national/local market trends, you must decide is NOW the right time to buy or list a home?

As a Buyer, how much extra are you willing to spend for a home offered in a Sellers’ Market?  And how much will you save if you wait for a the shift to a Buyers’ market?  What could waiting cost you if interest rates increase? As a Seller, how much more can you make if you wait for a Sellers’ market before you list your home?  And how much more will it cost you in maintenance, taxes, utilities, insurance, etc. to stay in your home until a later time?