Seller's Market or Buyer's Market: Pricing Your Home for Success

Selling a home can be an exciting time for a homeowner. It's now time to come up with a listing price that takes into account the value of the home and all the renovations and upgrades you invested in it, so you can hopefully make a nice profit and move towards your next home.

When preparing your home for the market, your real estate agent will advise you the current market conditions in the region, and how you should price your home for a buyer's market or seller's market.

Nuances of a Seller's vs Buyer's Market

The real estate market is always fluctuating due to various factors. There may be a sudden increase of new home development that creates a surplus of home inventory in the area. Some areas may see more new buyer interest based on the types of neighborhood features, work opportunities and educational options available. While some areas may be going through an economic slowdown, other cities may have such a low inventory of houses available that it is creating bidding wars between interested buyers.

All of these factors come into play when pricing your home and how long the house may be on the market. If there is high buyer interest in your neighborhood yet low inventory, this scenario is often called a seller's market.

In a seller's market, buyers are willing to not only go with the listing price of the home, but pay more to outbid other buyers because there simply aren't enough houses placed on the real estate market to meet current demand.

When a seller's market occurs, you are at more of an advantage when it comes to getting your asking price. Sellers have the luxury of placing a listing price that is higher because they know there aren't that many other homes that are available to please the current influx of buyers.

A buyer's market occurs when there is a large amount of home inventory available. Buyers typically take more time in selecting their future home and aren't as eager to place a quick bid. During a buyer's market, sellers may begin reducing their prices to make the property more attractive so it doesn't sit on the market for extended periods of time.

What Determines a Buyer's Market Versus Seller's Market?

Buyer's Market

Real estate market experts, analysts and agents will check out current home listing information and property sales. They will take note of the number of new listings, the price of the listings, and the length of time properties sit on the market before being sold within a six-month period. As the days on market grows longer, and there are still a significant number of unsold houses sitting on the market, this forces sellers begin to drop their listing prices in order to compete with other sellers. This is a key indication that the market is moving towards (or already is) a buyer's market.

Seller's Market

Conversely, if a large number of houses are being sold as home inventory drops and prices increase, this is a seller's market. In this environment, the days on market will be significantly reduced, perhaps just a few days. Prices will also steadily increase, and as the seller's market strengthens, multiple offers may become more common, and buyers will not only compete on price, but also contract terms -- for example, possibly waiving home inspections. Ultimately, inventory simply cannot keep-up with demand. These are all indicators of a seller's market.

Keep in mind that real estate markets can be quite different from neighborhood to neighborhood - so the opposite may hold true for your particular area. For example, new home construction may be on the rise in your immediate area, creating a buyer's market with people simply not as interested in purchasing a pre-owned home.

Also, just because the area is going through a seller's market doesn't mean seller's have the luxury of placing in an aggressive asking price. Even if there are more buyers looking for homes, they won't jump on your property if the price is simply too high for the overall value of the house. Overpricing is a mistake, no matter the market conditions.

Tips to Creating the Ideal Listing Price for the Current Market

When determining your home's initial list price, your real estate agent will run a report of comparable properties in the neighborhood to determine the home value for your property based on similar recently sold houses in the region. This is known as a Comparative Market Analysis, or "CMA." Then they will analyze current market conditions. By taking this data into consideration, they can help you decide on the best listing price.

Your real estate agent can also help you come to an ideal listing price based on your current lifestyle and selling preferences, or even your selling timeframe. This is critical as it will take into account the fact that you may need to sell the house quickly and therefore may be more inclined to seriously consider the first offer. In other words, "price" isn't always a top priority for sellers.

Pricing your home correctly will allow you to draw interest in the property, and sell according to your financial needs and timeframe requirements. With the help of your real estate agent, always keep tabs on the current market conditions to get the right sales price that you desire. #hw