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When you look into buying and selling properties, you have to learn a world full of new terms. You hear phrases like “seller's market” and “buyer's market” and receive all sorts of advice where those terms are crucial for executing the plans provided. While we can't teach you everything in one day, we can certainly tackle one of those mysteries in this post.

What is a seller's market?

A seller's market occurs when the inventory of real estate in your area is low, leading many buyers to overpay for a house and builders to start building. To figure out what type of market you are in your area, you have to calculate the absorption rate.

You get the absorption rate by calculating the number of homes that closed in your area in a period and dividing that number by the number of months within that period -- this will give you the per month absorption rate. The per month absorption rate is the number of homes that are snatched up monthly. To find the current month's house supply, divide the number of homes on the market in your area currently by the monthly absorption rate. If your inventory is less than 6, you are in a seller's market.

Let's say Joe Realtor wants to find the absorption rate of his area to determine what kind of market he's in. First, he would take all the homes that closed within the last 12 months. He found 1,200 homes sold in his city in the previous year. He then uses that number (1,200 households) and divides it by the number of months in that period, or 12 months. He's left with 100. So, every month, 100 homes are closed on in his area. This is the absorption rate. Now he takes the number of homes currently on the market (400) and divides it by the absorption rate (100), and the number he comes up with is 4. Therefore, it will take 4 months to sell the current inventory. Because four months is less than six months, he determines that he is in a seller's market.

Buying in a Sellers Market

Buying in a seller's market can be pretty intimidating. There are a few ways to make sure you have the smoothest ride possible. These tips won't necessarily make it the easiest process in the world, but it will make the process easier.

Find an Experienced Agent

Finding an experienced agent is key to locating the perfect home in a hot market. They'll be able to locate the best homes and go to bat for you when it comes to negotiating the price. Make sure you interview your agentbefore working with them. You don't want to get into the buying process before you find out just how inexperienced your agent actually is!

Get Pre-Approved

If you're buying in a seller's market, you definitely want to make sure you have a pre-approval letter. Many offers on homes will turn into bidding wars, and you'll have the upper hand if you can prove that you can get funding on the property. It shouldn't take too much of your time to get pre-approved. A simple call to your lender should do the trick!

Save A Higher Down Payment

The amount you're willing to put down on the house will also determine how much you can afford. The more you save, the more you'll be able to afford, which gives you more options to choose from. Try to save 20% or more, especially if you want to go into your loan without PMI.

Be Patient, Act Fast

It may seem like a contradiction, but being patient is one of the best things you can do when purchasing a house in a seller's market. Carefully search listings for the right house and be sure about the listing before you make the offer. Once you're confident in the listing, though, act fast! You don't want someone else to snatch it up before you even get an offer in.

Selling in a Sellers Market

Selling your home in a seller's market is exhilarating! Although the process can go pretty fast from listing to close, there are a few things you should do to make sure you get the best price for your home.

Find a Local Expert Real Estate Agent

Using a local real estate agent who is an expert in the community you are selling in is crucial to selling your home fast for a good price. They'll be able to help you list your home at a good price and help field any lowball offers. While there are many ways to locate a great agent, it's best to choose an agent that has great reviews to ensure you have the best experience.

Prepare Your House to Sell

While your house is bound to go fast once it hits the market, it's best to know what repairs and renovations(if any) that will increase the value of the home. Some of these repairs include replacing your roof, repairing your deck, and filling any holes in the wall.

Price Your Home Right

Pricing your home to sell in a seller's market really depends on two things: how fast you want to sell it, and what homes similar homes in your area are going for. If you want to sell quickly, you could price your home at Fair Market Value and get offers pretty quickly. If you want to make more of a profit on your home, it's best to complete a CMA and determine your price point from there. Your real estate agent will help you through this process and help you price your home according to your goals.

Need help buying or selling in this crazy market? You need a local real estate expert. You need Clever. Call us today at 1-833-2-CLEVER or fill out our online form to get started.


Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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