What is a seller's market?

What is a seller's market?

A sellers market is a real estate market in which the number of homes for sale (inventory) is less than the amount of buyers looking to buy a home. In a balanced market, there is about 6 months worth of inventory, but in a sellers market, the inventory is down to 2 months, and in some areas less than 1 month. What this means is that the supply of homes for sale would be exhausted in just 2 months by buyers if no more homes were listed.

What does this mean for you? Well, that depends on which side of the real estate transaction you are on.

Buyers are dealing with bidding wars on almost every property they are looking at. You go look at a property the day it is listed, fall in love, and make an offer only to find out there are multiple other offers. If you want to be the winning bid you must do everything you can to make your offer more appealing than the others. And even after offering substantially more than list price, you still often loose the home to another bidder and have to start your search all over again. This can go on and on, and many buyers are having to make 10 offers and sometimes more before they are able to get in a property just because there are so many other people looking for a home too.

On the flip side, sellers are seeing property values sky rocket and when they have a home that is priced right it often sells very quickly and for higher than the asking value. Now, many homeowners think this is a great market to sell your home in, and it is very appealing counting the extra equity you are gaining by selling at a time when everyone wants to buy. However, even as a seller you are facing problems when selling. Homes are selling so fast that the appraisals are not keeping up with market values and many homes do not appraise for the amount they are selling for. It is very stressful when you think you've sold your home for a high amount but then the appraisal comes in $20,000 low and the buyer is suddenly no longer able to get the home at the price you both agreed to because the banks won't lend on a home that does not appraise. Unless a buyer or seller wants to come up with the difference (sellers going down in price or buyers paying additional cash out of their pocket or a combination of both), the deal will not go through. Then when a seller sells, they need a home to move to and become buyers in this crazy market and have to face the same problems, unless they are relocating to a different market. Even rentals right now are being leased at record rates, and the rent rate goes up all the time.

What can you do as a homeowner or buyer in this situation? Your best option when buying and even selling in this sellers market is to make sure that you have a competent agent on your team to guide you through the issues you may face and help you conquer them. A good agent knows what to do to make your offer more appealing and can also guide you through appraisal issues and may even be able to dispute a low appraisal.