Market climates are determined by the amount of time it takes to sell a home. To manage expectations and also to design the right strategy, it’s very important for a seller to understand which type of market they find themselves in. Ask your sales consultant to describe your current market, and here are some terms to help you understand their answer.
In general, there are three types of markets: a seller’s market, a buyer’s market and a balanced market. Here’s a little more information about the characteristics of each one.
A Seller’s Market
This is a scenario where there are lots of buyers but not many homes for sale. This high demand tends to work in the seller’s favour because properties spend less time on the market and the overall climate of scarcity means that prices rise faster.
For sellers, this is an ideal time, as it means they can be firm on the price of the home as well as the conditions of the sale. They can adapt the logic that if Buyer 1 doesn’t like what they have to offer, then Buyer 2 will be more than ready to make a move.
A Buyer’s Market
The exact opposite of a seller’s market, in a buyer’s market, there could be hundreds of homes for sale but far fewer buyers. When this happens, properties tend to spend more time on the market, and sale prices reduce. This is because there is less demand than supply, meaning buyers have more leverage.
Just like seller’s can use a seller’s market to be firm on price and conditions, buyers can use their position in a buyer’s market to bargain hard and negotiate conditions in their best interest.
A Balanced Market
As one might expect, this explains a situation where the number of buyers and sellers is relatively equal. No one has an advantage, and properties are neither sitting around on the market nor being snatched up shortly after going up for sale.
What Does This All Mean?
It’s important to know the different types of markets out there, but how does this affect you if you’re in the market for a home or other type of property? Well, if you’re involved in buying property as an investment or as a means of making income, then this will help you decide when you should or shouldn’t act on a property.
However, if you’re in the market for personal reasons, and you won’t buy a property until you sell yours, or won’t sell yours until you buy something else, then these market designations don’t carry much weight in your decision. It’s more important to find a property you love and let your sales consultant do the work of finding someone to buy your current home.