I’m talking about buyers market versus seller’s market and what that means for you as a buyer. If you’re looking to buy your first house you must be super excited but you’re probably hearing all kinds of jargon things like buyers’ markets and seller’s market so I thought I’d explain a little bit about how they work. Really it’s a way to describe the temperature of the market and what’s happening at a certain point in time and of course who has the advantage so let’s talk about each one.
A seller’s market is when the inventory is low and the number of houses of the number of condos that are available at any point in time is very low. When there is not a lot available on the market then the seller actually has the advantage because prices tend to creep up and they have the stronger or the upper hand when it comes to negotiating.
In a buyers market, it’s exactly the opposite. There are lots of properties on the market, lots of houses, lots of condos, lots of sellers looking to get rid of their properties or to sell them at that point in time and so as a result the prices tend to decrease and they’re on the market for a little bit longer.
So we have buyers markets and seller’s markets because of a number of different factors, things like what’s happening in the economy, what’s happening with inflation, what are the new government policies that are being brought in what’s happened to immigration, with construction, with job employment. There are so many factors and that’s why the real estate market cycles between buyers markets and sellers markets. There is no real way to predict how long a cycle is going to last and it definitely varies. It can be a buyer’s market or a seller’s market for a month or a couple of months or a particular type of market can actually last for quite a few years.
If you are ready to buy your first home because it’s the right time in your life, maybe you just got married or you’ve got enough of a down payment or you’re just you’re ready to stop renting you’re ready to move out of your parent’s basement. You should really wait for the optimal time from a market perspective because you may actually be waiting for a super long time but the real question is how do you negotiate, how do you get into the market as a first-time buyer.
Whether it’s a buyers market or a seller’s market so let’s talk about the two of them so if you find yourself in a scenario where it is currently a seller’s market which means that the market is super red-hot and there’s not a lot of inventory you actually have to do a lot more homework in preparation before you buy your house so your pre-approval on your financing needs to be really button-down and firm. So it’s not just about you going online and plugging in some numbers on a calculator and spinning out what you’re approved for you should be working with a mortgage broker you should be submitting all of your documents in advance they should be able to lock you into a rate, that way when you get to the property you can actually put in an offer.
That’s a lot cleaner, a lot fewer conditions in this instance you may want to work with your lawyer to have them pull the title of the property before you end up putting in the offer. Same thing you want to take the MLS listing you want to give it to your mortgage broker especially if it’s a condo to confirm that the condo fees aren’t going to be totally out of whack in terms of what you’ve been approved for and you want to really have all your ducks in a row so that by the time you put in the offer your offer is as simple as possible. When you’re in a seller’s market you may also want to be a little bit more flexible on the closing because you know once the seller actually sells their property they need to have somewhere to go, so you may want to also include some elements that allow them to be able to find a place. That will actually put you ahead when it comes to some of the other buyers. You also want to make sure that you’re putting in your best offer.
Now obviously you don’t want to just be putting in tons of tons of extra money above asking but if it’s a property that you really really want, you’ve got to put all your cards on the table the first time around because otherwise, you may lose the property to somebody. Now when you are looking at buying a property and it is a buyers market you actually have the luxury of time oh sweet time, there aren’t going to be as many other people looking to purchase that property because it’s a time when there’s actually a lot more inventory on the market. So when you are putting in offers in a buyers market you have a little bit of flexibility to maybe going a little bit lower because there’s going to be a little bit more of an opportunity to negotiate. You may put in a lower price and they may put them at a higher price and you may end up moving up but you don’t have to necessarily put your very best offer first when you’re in a buyer’s market. Now when you’re in a buyer’s market of course you also have the luxury of being able to put in more conditions so definitely one I really recommend is a home inspection so you know exactly what it is that you’re purchasing.
You know you can make sure that you’ve got that in there and you’ll have an opportunity to firm up your financing and what you are approved for after the offer is accepted. But I do always recommend that you know you don’t mess the seller’s around and you don’t want to be disappointed either so it’s always good to get that pre-approval before you’re putting in the offer. I should mention that there’s also a balanced market which kind of sits in between a buyers market and a seller’s market and with the balanced market you know nobody really has a significant advantage it’s pretty much on par between the two. I bet you’re wondering how do you determine if it’s a buyers market or a seller’s market so there’s a number of different ratios and percentages like absorption rate and percentage of properties that around the market that is being sold but that stuff feels a little bit heavy on the jargon perspective so I would ask a realtor or a mortgage broker what’s happening.
But if you’re looking to gauge for yourself what I think is the greatest indicator is just the number of days that properties are on market. So if a property comes on to the market and inside of seven days as being sold well that’s an indicator that is actually a seller’s market. But if a property has been on the market for a month or two months and that’s what you’re seeing is the average time on market the average days on market then it tends to be more of a buyers market so if you find yourself in a buyers market know that the prices haven’t necessarily dropped versus last year. It just means that inventory is on the market for longer properties are available for a longer period of time so you can take your time a little bit more in terms of securing the property.
That brings me to my tweetable today whether you’re in a buyers market or a seller’s market make sure that you prepare strategically because regardless of what’s happening in the market you want to make sure that you know exactly what you’re doing you’re taking the right steps to make sure that you get the property of your dreams at the best optimal price my challenge to you is if you are looking to buy your first property is don’t just focus on the emotions in the excitement of it all, but think about and ask the experts of the industry what’s happening from a market perspective. Whether it’s a buyers market or a seller’s market and then plan your steps and how you’re going to get into the property of your dreams.