The housing market is in a constant flux that can be difficult for anyone to pin down, even more so if you are thinking of buying a new home or selling your current home. Housing markets are affected by numerous factors, and your local buyer’s market can differ from state or national trends.
Depending on the housing market, you may find better luck as a buyer or seller in the real estate market. That does not necessarily mean that people are incapable of selling or purchasing properties all year round, but it does mean that the state of the real estate market can dictate the deals you get and the most optimal time to buy or sell. Read on to learn more about the buyer’s market and some tips for purchasing a home in a buyer’s market.
Are you wondering what is a buyer’s market? While there are numerous granular factors that can affect the housing market, much of it can be boiled down to supply and demand. Supply and demand tend to be the foundation of much of the current economic system. Supply refers to the relationship between the price of a product and the quantity of that product. Demand tends to mostly be understood as the number of people who want the product, which is not necessarily wrong, but it mainly refers to the amount of the product that people are willing and able to purchase.
In a buyer’s market, the supply of homes exceeds the demand. This means an increase in homes on the hot market but a shortage of interested buyers or a lack of buyers able to purchase homes. A buyer’s market generally favors buyers over sellers as it provides buyers with more options with little competition.
Buyer’s markets can be driven by numerous factors in the larger economy and within local communities. Some general factors that may contribute to a buyer’s market include:
The buyer’s market is most often characterized by homes selling for less. Interest rates on mortgages may also be lower. Both of those factors naturally make the process more accessible to buyers. With the increased number of homes on the seller’s market, buyers do not have to commit as hard on a single property. They can take their time, compare homes, and find the house that fits all or most of their requirements.
Houses also tend to stay on the market for longer and take longer to sell. This can be good for buyers as it allows them to take advantage of all the necessary channels to ensure that the home meets their personal standards. Buyers can request inspections, appraisals, and other tools to take care of issues before they ever even move in.
For sellers, a buyer’s market can be difficult. There is more competition between sellers, often resulting in price wars to attract potential buyers. While some sellers may lower their asking price drastically, others may implement incentives to entice offers, even if those incentives potentially put more of a burden on the seller.
If you are a homebuyer in a buyer’s market, you truly hold most of the power when it comes to finding the perfect house and closing a deal. However, it is important to not get too carried away or careless. Even in a buyer’s market, good deals can still slip away if you are not prepared. Here are some general tips for buying a home in a buyer’s market.
In a buyer’s market, you can truly take your time with the buying process. The increased supply of homes on the market and the lack of buyer competition means that you do not need to rush or make any quick decisions.
Furthermore, if you are interested in a property that is a little out of your price range, you can wait it out a little before you commit to an offer. A home seller is more likely to let the price drop if their home has been sitting on the market for a long period of time with no offers. If they do see an offer or two, you can easily sneak in with a counteroffer to outbid.
Being able to take your time also means having more time to browse all the options. Look at nearby school districts, public transit lines, and other amenities that are important to you and your family. Research comparable homes in the area and their prices to find the ideal home for your budget and personal preferences. Often, if you can find a comparable home that is cheaper than the property that you are interested in, you can bring that information to the negotiation and potentially push for a better price.
Keep an eye on how many days the house has been on the market. The longer the house has been on the market, the more power you have and the more concessions that the seller is willing to make.
Consider asking yourself what is a seller’s market and consider if it is right for you. A smaller detail to consider is the reason for the seller putting their house on the market. They may just be looking to upgrade, but some sellers may need to move for work or because of financial burdens. Knowing these potential constraints can lead to a better deal for you and a faster process overall.
Buyer’s markets definitely allow for lower offers than what you might normally expect, but even the most desperate home seller may ignore offers that are far too low. Assuming the house that you want is in line with the current market, it is a good idea to offer the listing price.
If you are not sure what to offer, work with an agent or do your own research to look up comparables, or comps, which refer to recently sold homes that are in the same location and similar in size and features as the house you are looking at. This gives you a better idea of what to offer and can help you negotiate down the price.
Even if the seller refuses to go below the listing price, you can still negotiate other aspects of the deal, including contingencies.
Contingencies are clauses that get worked into the final closing deal of the home. These contingencies are things that the buyer requires from the seller to fully close on the deal. If the seller fails to deliver on all of the contingencies, the buyer is allowed to walk away from the deal with their earnest money returned to them in full.
In a buyer’s market, you can generally include more contingencies in the purchase agreement. There is a wide range of contingencies that you can take advantage of, but the most common include:
Contingencies can be a liability in a seller’s market, often resulting in sellers ignoring certain buyers who include numerous contingencies. In a buyer’s market, contingencies can be one of the best tools in your arsenal. However, keep in mind that most contingencies will extend the timeframe and delay closing. For example, a home inspection contingency would require the seller to take care of repairs, which may add extra weeks to the process.
Along with the home price and contingencies in the purchase contract, you have numerous other things that you can negotiate during the home sale. This includes:
Under a buyer’s market, the buyer has more power and can dictate much of the home buying process to get the most out of their new home. If you are looking to buy or need help purchasing a home during a buyer’s market, consider working with Berkshire Hathaway HomeServices California Properties. Our team can walk you through the process and make sure that you get the best deal on your home.