Buyer, Seller And Neutral Markets - What Are The Differences And What Do They Mean To Me?

Buyer, Seller And Neutral Markets - What Are The Differences And What Do They Mean To Me?

Sarah Lefebvre
Sarah Lefebvre
30/09/2020 | 5 MIN READ

Anyone who has studied the property market, knows at different times, the scales tip in favour of buyers or sellers, but what does this actually mean, how does it impact you as a buyer or seller and what happens if the market is neutral and no one has an advantage.  Here’s a look at each of the different markets and the signs to look for to determine what market your suburb or area is in.  

Timing the real estate market is complex. It can change quickly depending on wider economic, political and unexpected global issues like the pandemic we are experiencing now. However, understanding the different markets and signs to look for can help you when determining whether it’s the right time to buy or sell.

What is a seller’s market?

A seller’s market is a real estate term that describes a market where demand exceeds supply, or in other words where there are more real estate buyers than sellers.  Effectively, there are not enough properties on the market for all the interested buyers, so demand for property outstrips supply.  This often leads to multiple buyers interested in a single property, resulting in bidding wars and in many cases higher than expected sale prices. 

Needless to say, if you are considering selling, selling in a seller’s market is preferable. But how do you pick a seller’s market? 

Signs of a seller’s market?

  • Homes are selling for high prices - even in ‘original condition’
  • Sale prices are exceeding listing prices
  • Compared to previous months or years the number of properties on the market is low
  • The percentage of successful sales and auction clearance rates are higher than normal
  • The economy is on the rise
  • Low days on market - Properties are selling rapidly and sold stickers are quickly being added to signboards
  • Sellers don’t offer incentives or discounts

What does this mean if you are a buyer? 

During a seller’s market demand is high and sellers are often inundated with multiple offers.  Prices often rise, more buyers offer non-contingent contracts and are less likely to ask sellers for concessions or changes to the contract. 

If it is a seller’s market and properties are being snapped up quickly it may be better to put down your best offer first.  This is where doing your market research becomes important.  Knowing what you should be paying for the property based on market data and discussions you have had with the Sales Agent, is key to having your offer accepted.

Tips on making an offer in a seller’s market 

  • Don’t offer lower than the listing price
  • Consider offering a larger deposit
  • Don’t request favours or have too many conditions to the sale
  • Offer the seller a few extra days to move out after settlement
  • Submit pre-approval of your loan and proof of funds documentation 

What does it mean if you are a seller?

If you’re lucky enough to be experiencing a seller’s market in your area, and you’re keen to sell your property, now may be a great time.  To make the most of the market ensure you: 

  • Work with your agent to create a strategy that is focused on delivering outstanding results
  • Understand what similar properties in your area are selling for so you can gauge your pricing
  • Prepare your home for sale as you want to encourage as much buyer competition as possible, as competition can equal higher prices
  • Invest in a strong marketing campaign to reach as many buyers - passive, active, local and out of area including

What is a buyer’s market?

The term buyer’s market refers to when the conditions are more favourable to buyers.  This occurs when there are more properties on the market than there are active buyers. If buyers have a range of properties to choose from within their price range and limited competition from other buyers, they are in a stronger position to negotiate the sale and potentially purchase a property for less than the original listed price. 

What are the signs of a buyer’s market?

  • There are a higher number of properties for sale or auction than in previous months or years
  • Properties are consistently selling for less than expected
  • Properties stay on the market for longer than the average
  • Current listing price is lower than previous purchase price
  • Asking price for properties start to drop
  • Sellers start to offer ‘extras’ as part of the sale eg: longer settlement

What does this mean if you are a buyer? 

In a buyer’s market whilst you may have more choice and therefore feel like you have more time to make a decision on what to buy and how much to offer, if you have found your dream property, do not wait to put an offer in.  Go in with a strong offer and go in quickly.  

Tips on making an offer in a buyer’s market

  • Understand recent comparable sales
  • Talk to the Sales Agent about what the owner may accept
  • Go in with a strong offer based on market conditions
  • Submit pre-approval of your loan and proof of funds documentation
  • Be prepared to negotiate and make sure you are ready for a ‘yes’

What does it mean if you are a seller?

 Selling in a buyer’s market can be a great time to make an upgrade.  If you are selling and buying in the same market, you can potentially jump ahead into a property that may be unobtainable in another market. 

If you are selling in a buyer’s market, you need to stand out in the marketplace for buyers to notice your property.  Ensure you:

  • Know your local competition and how much they are pricing their property at
  • Price your property appropriately and accurately
  • Highlight key / unique features of your property
  • Prepare your property for sale to make it more enticing
  • Be flexible and ready to negotiate
  • Consider offering incentives such as longer settlement or discounting your price

What is a neutral market?

The third type of market is called a neutral market and as the name suggests it doesn’t favour either a seller or a buyer.  It implies there are no large ups and downs in demand, supply or price.

Signs of a neutral real estate market 

  • If you look at the number of properties that have been listed for sale over previous years, the current listings numbers are average
  • Property sale prices are close to the listing price
  • The average price of a property is neither increasing nor decreasing
  • The number of buyers is stable
  • Properties are selling within 4-6 weeks after listing 

A final word

In most cases, property markets aren’t strictly a buyer or seller’s market, but rather a mix of both. For example, most cities and regions in Australia have suburbs where supply is greater than demand and vice versa, creating a mix of both buyer and seller markets. 

 

However, understanding and being able to recognise the signs of the different real estate markets is important when buying and selling.  Your local McGrath Real Estate Agent is highly aware of the current conditions, whether it is a sellers, buyers or neutral market. To talk to them about your local area click here

 

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