A buyer’s market occurs when there are more properties for sale than there are buyers to purchase them. In a buyer’s market, demand is low, while in a seller’s market, demand is high. The real estate market naturally shifts between both.
A buyer’s market is the ideal one to be in if you’re looking to make a purchase, for a number of reasons. We’ll take a look at the specifics of a buyer’s market, what it means for those looking to buy or sell a home, and how you can make the best of a buyer’s market, whether you’re looking to purchase or sell.
Definition and Examples of a Buyer’s Market
Having more homes on the market than there are buyers to purchase them results in a buyer’s market. During a buyer’s market, homes tend to stay on the market for longer, and sellers must work harder to attract interest. This means they’re more willing to negotiate. If you’re looking to purchase a home, you’re more likely to settle on an offer with more contingencies that the seller has to satisfy and a lower purchase price, and you may even have the seller cover some of the closing costs.
The average amount of time a home remains on the market in a buyer’s market is longer than during a seller’s market. There was a seller’s market for real estate in 2020, and during that year, homes spent an average of 25 days on the market before going under contract. This was down from 30 days on the market in 2019, according to Zillow.
Of course, the average time it takes to sell varies, depending on your regional market. Your location, the time of year you’re looking to buy or sell, and the availability of properties can all affect this timeline—regardless of whether it’s a buyer’s or seller’s market.
How a Buyer’s Market Works
When there are more homes on the market than there are buyers, those looking to buy a home are better positioned to get what they want, since more sellers are struggling to find a buyer.
This is the ideal time for you to buy a home. A buyer’s market gives you the ability to lead the negotiations for whichever home you choose. In this case, you may want to ask for concessions, like the seller covering your closing costs and additional inspections, to minimize your out-of-pocket expenses and better vet the home you want.
Here are some common concessions to consider:
- Ask the seller to cover closing costs, such as inspection fees, title insurance costs, and transfer taxes.
- Ask the seller to pay for home repairs, such as those found during inspections.
- Ask the seller to pay for new appliances, if necessary.
- Ask the seller to pay your moving costs.
You may also choose to offer a lower amount than the list price, especially if the property has been on the market for a significant period of time.
In the case of a buyer’s market, you are the thing that is in short supply and high demand. Be aware that real estate markets are cyclical; drastically increased home prices and a surge in home listings during a seller’s market can ultimately lead to a buyer’s market.
If you’re selling a home during a buyer’s market, be aware that you’ll need to negotiate with the buyer and will likely have to agree to some concessions.
Buyer’s Market vs. Seller’s Market
We’ve discussed at length what a buyer’s market is and even mentioned that a seller’s market is its opposite. But let’s take a deeper look at the differences between a buyer’s market and a seller’s market.
In a buyer’s market, there’s plenty of room for negotiation on the behalf of the buyer. There is a glut of available properties from which fewer buyers can take their pick. In a seller’s market, however, there are fewer homes available for sale than there are buyers. This makes it an ideal time for the seller, who can force multiple offers, where buyers are competing against one another for a single property.
In a seller’s market, the buyer is in the weaker position and will do what they can to stand out from the crowd. This can include all-cash offers, above-listing offers, and the elimination of any contingencies. This may even include the waiver of a home inspection.
If you’re a buyer in a seller’s market, waiving the home inspection may be tempting, but it means you’re willing to buy the house as-is, which could leave you vulnerable to unexpected repairs and maintenance.
If you can wait to purchase a home, it may be in your best interest to do so. A seller’s market is a difficult time to be a buyer. On the other hand, you could get tens of thousands of dollars above your asking price if you’re a seller in a seller’s market.
|Buyer’s Market||Seller’s Market|
|Too many homes, too few buyers.||Too many buyers, too few homes.|
|Sellers are willing to negotiate.||Buyers are willing to negotiate.|
|Single offer on a home; might sell at or under list price.||Multiple offers on a home; may drive purchase price above list price.|
- A buyer’s market occurs when there are too many homes on the market and not enough demand.
- A buyer’s market means the purchaser is in a position of power when it comes to home selection and negotiations.
- As a buyer, waiting for a buyer’s market may allow you to negotiate the best offer for you.
- A buyer’s market is often not an ideal time to sell.