Seller’s Market vs. Buyer’s Market: Understanding the Difference

There are a lot of different factors that determine how fast a home sells. One of the biggest ones: market trends. And specifically, whether you’re selling or buying in a seller’s market or a buyer’s market. The seller’s market vs. buyer’s market difference can be boiled down to competition. How much competition you have will determine how active listings are in your area, how you price your home or your offer, and how much power you have at the negotiation table. It’s no wonder then that something so simple can play such a big role in how your real estate journey plays out.

Markets tend to ebb and flow between being a seller’s market vs. buyer’s market. Sometimes, the switch happens unexpectedly, with the real estate market switching over seemingly overnight. But if you’re a buyer or a seller, you’re going to need to know what you’re working with—as well as the unique advantages or challenges that it presents.

To help you out, we’ve put together this quick guide to understanding a seller’s market vs. buyer’s market. In addition to going over the key distinctions between the two, we’ll also cover some tips and advice to follow depending on the market you find yourself in.

What is a Seller’s Market?

A seller’s market is when there are more buyers on the hunt than there are homes for sale. This creates a heavy amount of competition for each home (especially the most desirable ones), and gives seller’s more power and buyer’s less. Someone looking to purchase a home in a seller’s market won’t have as much wiggle room on their offer, and may even have to offer more than the asking price if they want to snag a hot property. Meanwhile, seller’s can price their homes higher, and have much less incentive to agree to buyer contingencies or concessions.

Tips for buying in a seller’s market

Don’t hesitate. With less power on your side, it’s important to make smart decisions when buying in a seller’s market—and to make them fast. Waiting even just a few extra hours to put in an offer can mean losing out on a property you love. To help speed up the process, gather as much information about a house as you can before you go for a showing, including property tax info and any pending offers (your realtor will be able to help you out with both). That way, if you want to move forward you won’t have any lingering questions standing in your way.

Get a pre-approval. Get a mortgage quote and pre-approval as early as you can, and ideally before you ever start searching. A pre-approval lets seller’s know that you’re serious, and also gives you an idea of exactly what you’re working with financially.

Make it personal. Buyers and sellers are people, but it can be easy to forget that when you’re only communicating through agents and pieces of paper. For that reason, you may want to consider including a personal letter to the seller with your offer that speaks to why you want the property so much and what sets you apart from other buyers. If the home is on the same street that your grandmother grew up on, or if the yard looks like the perfect place for your rescue pup to run around in, say so! Even if you don’t have something so specific, a letter will help set you apart and bring some humanity to an otherwise stark and impersonal offer.

Tips for selling in a seller’s market

Make sure your home looks it’s best. The more appealing your home, the more offers you can expect to get. And the more offers, the better chance you have of a bidding war and an opportunity to earn more than you expected on your sale. Bring in a professional home stager or follow our best home staging tips and do it on your own. It definitely pays to put a little time, effort, and possibly cash into making your home look as great as it possibly can.

Set your price a touch lower than you might otherwise. We know, set a lower price? That doesn’t seem to make a lot of sense in a seller’s market. But being strategic with pricing now might end up making you more money later on, since a lower priced home is going to garner a ton of attention which might result in that all-coveted bidding war. Talk to your realtor about whether he or she thinks this a good strategy, or if the market is dictating that you’re better off pricing right where you want to end up.

What is a Buyer’s Market?

A buyer’s market is when there are more sellers looking to sell homes than there are buyers looking to buy them. This creates an inverse type of competition to what we talked about above, with buyers having more power since sellers are anxious to grab their attention (and their offer). Buyers have a better chance of nagging a sale at or below a home’s market listing, and can also usually sneak in a few extras too, such as having the seller throw in a home warranty or make some cosmetic repairs. And seller’s have to decide whether it’s worth acceding to buyer demands a bit, or if they’d rather take their home off the market and wait until the pendulum swings back in their favor.

Tips for buying in a buyer’s market

Set your sights on homes that have been on the market for a little bit. Sellers of brand new listings are much less likely to budge on price or concessions than those who have been waiting around for a while. Keep in mind that because it’s a buyer’s market, a home that’s been sitting for sale for a few weeks or months isn’t necessarily a dud—it may just not have had a ton of action. You don’t have to limit yourself only to homes with older active listings, but doing so would certainly increase your chances of getting a stellar deal.

Ask the seller to pay your closing costs. Closing costs for home buyers can run as high as 2% to 7% of the home’s purchase price, which is thousands of dollars out of pocket in addition to your down payment. Since it’s a buyer’s market however, it’s worth asking the seller to cover your costs instead, which will save you a lot of money. If you’re going to ask the seller to pay your closing costs though, just note that you’ll want to ask for less in terms of contingencies and post-home inspection repairs.

Tips for selling in a buyer’s market

Market far and wide. All hope is not lost for a seller in a buyer’s market. But instead of sitting around and waiting for the buyers to come to you, you’re going to have to cast as wide of a net as possible and hope to draw more of them in. In addition to the usual channels like MLS and aggregate listing sites, talk to your real estate agent about coming up with a plan for marketing on social media and other community-focused platforms.

Have your home professionally staged. Staging is recommended in both a buyer’s market and a seller’s market, but it’s in the former when you really can’t afford to cut any corners. A professionally staged home may cost you a little bit up front, but it’s going to make a strong impression with the potential buyers who come through your door. Get a recommendation for a stager through your realtor, or from other trusted sources who have used one before.

Add in some incentives. Buyers are more likely to ask for incentives in a buyer’s market, so why not offer a couple up front? Throw in your expertly designed patio furniture or new stainless steel appliances, or offer to pay HOA dues for the first six months after the sale. A little bit extra can go a long way, so if you want to stand out find a cherry you can put on top to sweeten the deal.

The seller’s market vs. buyer’s market dichotomy is something that you definitely have to be cognizant of when entering the real estate market as either a buyer or a seller, but it’s not a guarantee that your experience will go one way or the other. As always, try to go into the process with as strong of a position as possible and you should be able to come out on the other side with few barriers in your way.