What Does a "Sellers Market" Mean For Me?

With the reduction in available home inventory, some markets are experiencing what is typically referred to as a “Sellers Market.” This type of market can occur with almost any commodity and is characterized by a shortage of supply resulting in the ability for sellers to raise prices and/or have more control over the conditions of a sale.

In certain areas around Atlanta, we are actually experiencing something close to this type of market. Inventory is at a historically very low level and as a result, buyers are scrambling to find available properties. This frenzy of activity, especially on properties in good condition and in desirable areas, has put sellers in the driver’s seat when it comes to listing and selling real estate.

Hard to Buy, Easy to Sell

This summer, we were pleasantly surprised to see how many of our properties went under contract at or above asking price and usually within a few days of listing. After experiencing this on multiple houses, we came to understand just how lopsided our market had become.

While this can be a great thing for those who have properties to sell, it can be quite frustrating for those looking for something to buy. As a real estate investor, it’s just as important to be able to buy property as it is to sell. As such, many of our local investors have expressed much frustration with the inability to find inventory to buy.

However, for those investors who have good systems in place for finding properties, it’s been an incredible time for reselling properties to owner occupant buyers.

Better Ability to Negotiate

As a seller in this type of market, we’ve also found that we don’t have to be quite as flexible with our price or with the terms of the sale. Whereas a year ago we were bending over backwards to accommodate a buyer, we’re now able to take a different approach.

With the simple fact that the supply of houses is low and demand is high, we as the seller have the upper hand and do not need to cater to every request a buyer may make of us. On the last few contracts we’ve negotiated, we’ve countered with less closing cost contribution, higher sales prices, fewer repairs, etc.

Buyers inherently know that if they try to play hardball, especially on a desirable house, someone else may come in behind them and scoop it up. When you’re on the selling side in this type of market, you simply have more ability to negotiate terms that favor you.

I realize that many areas around the country have not yet recovered to the point of a seller’s market. However, it’s important to watch the trends in a particular area to see if you might find yourself in this type of market at some point in the future.

In Atlanta, we saw inventory levels shrinking and demand for property slowly increasing. I was fairly vocal about my prediction of rising values as a result of these economic factors. Sure enough, our market rose over 20% in the last 12 months and here we find ourselves in an excellent position to sell property.

Learning to read the trends in a particular market can make all the difference for an investor. Do you sell a property today, or wait 6 months because inventory is shrinking and prices are on the rise?

Understanding these types of market dynamics can make a huge difference in profitability — especially in a rapidly changing environment like the one we are in today.
Photo Credit: Wasfi Akab

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.