If you’re looking to buy your first property, it is very important to consider what is happening in the market.
Is it a buyer’s or seller’s market and what does this mean for you as a buyer? A buyer’s or seller’s market is just a way of gaging the what’s happening at a certain point in time and who has the advantage, buyers or seller.
A seller’s market is when the inventory or number of available houses or condos for purchase are low. If there are not that many available on the market at any point in time, then the seller has the advantage because prices tend to creep up and they have the upper hand when it comes to negotiating.
A buyer’s market is when there are many houses or condos available on the market. In this case, there would be more sellers looking to sell their properties; as a result of higher inventory, these properties are up for sale for a longer period of time. This can result in the price decreasing and gives the buyer the upper hand in negotiating as there are many other options available to them.
There are a number of factors affecting the housing market, causing sales to increase or decrease. Some of these factors being: the general state of the economy at the time, inflation, new government policies, immigration, the construction industry and unemployment to name a few.
The real estate market is cyclical, moving from a buyer’s to a seller’s market and back again. It is difficult to predict how long a cycle is going to last. It could vary, taking a few short months or it can even last for years in either the buyer’s or seller’s favour.
If you’re buying in a seller’s market, here are some pointers to consider:
- Prepare in advance. When there are not too many properties on the market you have to do much more “homework” in preparation before you put in an offer. The process will unfold very quickly and you have to be prepared.
- The pre-approval on your financing needs to be firm. You should be working with a mortgage broker and submitting all of your documents in advance to ensure there is no ambiguity on your financing.
- Share the property details with your mortgage broker. If you are looking to buy a condo, the monthly condo fees can impact your financing approval so share such details with your broker to ensure there are no concerns.
- Be flexible with dates. It could help you to close the deal if you show flexibility with your moving in date. The seller might need time to find a new home and by offering them extra time, it could give you an advantage over other potential buyers.
- Make sure to put in your best offer. Obviously you don’t want to offer way above the asking price but if it is a property that you have set your mind on, you should put all your cards on the table first-time round. If you don’t, you may lose the property to another buyer.
Buying in a buyer’s market, here are some pointers to consider:
- Supply is higher than demand. There aren’t going to be as many people looking to purchase a specific property as there are many more properties available for sale, which provides you with the opportunity to pace yourself as you enter the market.
- You’ll have more negotiating power. When there are fewer buyers you’ll be able to better influence the price. Your offer can be lower than asking price and there will likely be more rounds of negotiation between you and the seller.
- Put in more conditions. When you have the luxury of time, insist on a home inspection. You can also include a longer time period for your financing and insurance conditions to be lifted after your offer is accepted.
In order to determine if it is a buyer’s or seller’s market, you should consult with a realtor or mortgage broker. You can also check to see how long a property or properties in the area have been on the market before being sold. If a property comes onto the market and is sold quickly, that is a pretty good indicator of it being a seller’s market. If, however, a property has been on the market for over a month then it is likely a buyer’s market.
Whether you’re in a buyer’s or seller’s market when you buy your first property, make sure that you prepare strategically, ensuring that you end up with the ideal property and price you were hoping for.