Any time you start in a new profession — even as a sideline — you face a vocabulary problem. You come across acronyms and terms that you’ve never seen before. In real estate, two terms that often trip people up are buyer’s market and sellers market.
If you’ve struggled to wrap your head around these terms, keep reading for an explanation about their meaning and role in real estate.
What is a Buyer’s Market?
The term buyer’s market generally means that you can buy some product or commodity for less than the actual value. Let’s say that your neighbor, Bill, needs some fast cash. He says he’ll sell you some of his tools at a steep discount.
At a very small scale, that is a buyer’s market. Bill needs cash more than he needs those tools, so you can get them for well below their value.
You often see a similar trend in large-scale markets like real estate. For example, the housing recession that kicked off in 2008 was a buyer’s market. The market was flooded with properties for sale, which drove all the prices down.
The driving thought in a buyer’s real estate market is that you buy a property at a low cost with a plan to sell it when the market bounces back.
What Is a Sellers Market?
The term seller’s market means, in essence, the exact opposite of what a buyer’s market means. You can sell off a product or commodity for its actual value or in excess of its actual value.
Let’s say that your neighbor has a few boxes of vintage comics. You’ve looked through them and spotted at least 10 issues that you need to flesh out your collection.
In this case, Bill has all the power. He can ask the going rate or even more than the going rate for those issues because he controls what you want.
The same thing happens in real estate when you get a housing bubble, as happened before the 2008 housing recession.
What Is the Difference?
The essential difference between buyer’s and seller’s markets in real estate is who holds the power. In a buyer’s market, the person willing to pay you something holds the power. In the seller’s market, the person holding the property or product holds the power.
Regardless of the kind of real estate market, you always want to work with the best real estate agent you can find. Good real estate agents can help offset the effects of buyer’s or seller’s markets through careful negotiation.
Parting Thoughts on Buyer’s and Seller’s Markets
When you first dive into real estate, it’s important that you know whether you’re in a buyer’s or sellers market. If you want to acquire an investment property, hope that you’re in a buyer’s market. If you’re looking to flip houses, hope that you’re coming into a gentle seller’s market.
Looking for more useful real estate advice? Check out some of the other posts on our blog.
