What the Term 'Buyer's Market' Really Means and How to Make it

What Does the Term "Buyer's Market" Mean?

James Schulze, a Broker at ListWell Realtors of Massachusetts, provided excellent explanations of the different types of real estate markets. He said, " I explain real estate markets this way:

Demand is the number of willing and able buyers in a specific geographic area.

Supply (or inventory) is the number of willing and able Sellers within the same 
specific geographic area.

A balanced market is when the number of willing and able sellers is equal to the number of willing and able buyers. This balance creates a situation in which the inventory of available homes is stable month to month and year to year because for each home that is purchased by a buyer a new property is being  offered by a new seller.

A sellers market is when the number of willing and able buyers increases, purchasing more homes than are available. This decreases the inventory, creates a situation of scarcity and increases price.

Buyers markets are created by either a decrease in the number of available buyers, an increase in the number of sellers (increase in inventory) or a combination of both situation... when inventory is up, buyers have more properties to choose from and there is more competition amongst sellers to work with the pool of available buyers. Prices then go down."

Many real estate professionals agree that choice is what connotes a buyer's market, including Dameon V. Russell, Dir., Business Systems MAE Capital Mortgage.

However, some agents aren't completely convinced.

The Debate Over the Existence of "Buyer's Markets"

It's generally accepted that the conditions for a buyer's market do exist. However, the key is to remember that real estate is always local. What's happening in one part of the country isn't necessarily what's happening in your city. Even within your city some areas or a particular home is going to generate more buyer interest which will keep the market in that neighborhood balanced between buyers and sellers.

Tanya Marchiol, president of Team Investments, explains this using her own market as an example:

"Every market is different and certain communities of Arizona, although the inventory is great, the demand is even greater. So where it looks on the outside that it should be a “buyers’ market”, it is really a steady moving market. Not necessarily a sellers’ market yet, but steady balanced market."

Still some real estate professionals like broker Michael Byrd of SLO Home Store disagree with the notion of a buyer's market altogether. " I don't believe in the terms buyers and sellers markets. They imply that one party has some sort of control of the market which is not the case. Buyers in all types of markets need to do their homework to understand current values and, to the greatest degree possible, understand what the seller's goals may be. Both are critical components to successful negotiations."

How to Take Advantage of a Buyer-Friendly Market

When the market conditions are favorable for buyers, real estate agents say there are specific strategies buyers should keep in mind. Below are some tips that agents shared with us.

"Taking advantage of a buyer's market is as simple as being an active buyer. Sellers are desperately trying to sell property but in some regions, the discounts may not be as big as you would hoped. Serious sellers will have already reduced their prices to sell quickly. Your real estate agent should be an important advisor to ascertain proper pricing."

Ian Halpin
Broker Associate
Jameson Sotheby's International Realty

 

"Buyers in all types of markets need to do their homework to understand current values and, to the greatest degree possible, understand what the seller's goals may be. Both are critical components to successful negotiations."

Micheal Byrd
Broker
SLO Homes Store

 

"Even though this is a "buyer's market," some buyers get overly confident and kill their own transaction. This is by either low-balling the seller or making excessive and/or puffed-up estimates for repairs or repair credits. This is a guaranteed losing strategy. The best strategy to make a sale work is to take the position of being fair to the seller and act in good faith."

Monique Bryher
Broker-associate/Realtor®
Pinnacle Estate Properties

"Work with a professional that you trust. Be willing to listen and follow their advice; realtors, we have a fiduciary duty to work for the best interest of our client."

Chantay Bridges
Senior Real Estate Specialist
Clear Choice Realty & Associates

"Best advice is simple, once you understand a buyer’s market the buyer has to do the following:

1. Determine type of property, desired location, price range and
have financing in place

2. View several properties that are well-priced

3. Analyze comparables and make an offer"

Penelope Friedland
Realtor^®
Luxury Home Team, Coldwell Banker

"Be prepared. Gather prior market information for the area in which you would like to live. Save your money, pay down revolving credit, find out what types of financing are available to you. Shop, shop, shop. You will become an expert buyer when you have found your dream home and did not get it because you dragged your feet or were afraid to pay market value for a home that is priced to sell. Once you've had your heart broken, you will know what a good deal is."

James Schulze

"Over the past few years, prices have consistently been dropping, but that doesn't mean buyers should expect to get a property for nothing.  While it's important to get the best price you can, don't low-ball the seller on an already great asking price. A cheap property doesn't necessarily equate to a great deal. The buyer should consider a variety of factors beyond the price including the financial status of the building (if a condo), location desirability, and upside potential. Buyers should know the home's history - if the property wasn't commanding high prices at the height of the market, it certainly isn't going to as the market recovers...at least for the extreme long-term."

Melissa Rubin
Broker
Platinum Properties International

"Given the reality of a buyers' market, I tell sellers that they have to consider every offer carefully even if it isn't for the number they'd like to see. That's especially true if the buyer is pre-approved for a loan because that increases the likelihood that the buyer will be able to close the purchase. As for buyers, I want them to understand that homes today are priced pretty realistically, so they shouldn't expect to negotiate a major price reduction in most instances."

Julie Snyder
Realtor®
RE/MAX Property Source, Rockford, Ill.