The Basics of a Buyers Market

by : Martin Lukac

Most markets are either on their way up or on their way down. In real estate, the market can be both. It simply depends on if you are a buyer or a seller.

A buyers market is when the market is swinging the way of the buyer. This is found when there are more houses on the market than there are buyers. This is seen when the average home takes over six months to sell. If there is over six months of inventory on the market, the market is a buyer's market.

Look at it this way -- the buyer is probably looking at several houses. The sellers have to entice buyers their way.

In a buyer's market, homes take longer to sell and prices fall. Not good for the seller, who really flourishes in a seller's market. But it is often good news for the buyer.

There are many people out there that believe the winter to be a season in which it is a buyer's market. It has been proven that there are fewer buyers in the winter, but there are often fewer sellers as well. You have to consider that when there are fewer homes being listed, they are often given more time considerations by the realtors -- making them agressively marketed. This could mean that they are still getting as much traffic as they would during the peak season.

No matter the season, a buyer's market exists when there are more homes than buyers, falling prices and increased time on the market for a home. Some buyer's markets last for years. Some are quickly here and quickly gone.

In a true buyer's market, buyers begin getting perks. Things that aren't normally conveyed with the sale of a home begin to be used as bargaining tools for the seller. Home warranties are thrown in. The sellers may pay for more of the closing costs. There are several contingencies.

If you are a seller during a buyer's market, you may not have to worry much. If you have owned your home for quite a while, you will still see a profit due to the equity you have built. But your home must be in good condition to compare with the other homes on the market.

If you must sell your home within a time period, you may find that you must take little or no profit from your home. You may even take a loss. If you have no equity built into your home, you may have to come to the closing table with cash or fall into default with your lender.

Keep in mind, the market is moody. It can change overnight. It will never remain a buyer's market forever. It will be a seller's market again.