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Buyer or seller who has negotiation power to get the price wanted? What is the difference between buyer’s market and seller’s market and when to reduce the asking price to attract buyers?

 

 

Buyer’s or Seller’s Market

Average or Market Price?

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Obsessed with housing stats

Is the average house price of any help?

 

Kiwi statistics are fascinating and eye opening, too. For instance take the average house price; has really anybody found out what an average house is and how the average price relates to it? You will find in each town streets with premium properties which are high priced and being sold do push the average house price upwards, and streets with houses, e.g. previously built as state houses, which do skew the average downwards.

 

What then tells us a number between minimum and maximum? Surely, helpful in politics and to blindfold people. In these days for a half million you would get in Auckland a “dog house” and in contrast in Upper Hutt a palace.

 

 

 

Do you look for average or market price?

 

Of course people look at the house price when a property catches people’s attention. Can I afford it or not is the key question.  In most circumstances you would query the market value and compare it with the asking price. However, the market value is what nobody really knows. The market value is the amount the buyer is willing to pay. If you are the buyer, the market price lays in your hands. That is the obstacle to overcome by negotiation.

 

This logic does explain why market prices can’t go up forever and also answers the question what is affordable or not. If a house or product attracts willing buyers that would result in competition and steady market prices.

 

In terms of negotiation the question is—who is in the stronger position, the seller or the buyer? The answer depends on the property cycle.  For simplicity reasons let us differentiate between buyer’s market or seller’s market. The experienced reader will know the economical conditions for each state of the property market (property cycle).

 

 

The Buyer’s Market  (low demand, good housing supply)

 

The common situation in the buyer’s market is when the housing market slows or is down. Sellers suffer from not getting what they are asking for due to the lack of buyers competing for the property. The buyer’s market is a slow market with lots of listings. Buyers feel confident by asking for discounts.

 

During the downward trend in market until 2012 the drop in values has burned many people, who purchased with small deposits (0-10%) during the housing boom (seller’s market). By 2013 the market values often dropped below people’s mortgage. That has been an expensive lesson for those who could not serve the home loan and had to sell with loss.

 

 

The Seller’s Market (high demand outruns supply)

 

The seller’s market is the opposite when the property demand is higher than the supply. Potential buyers are competing for properties and that drives up the market price.

 

Housing demand and supply, inflation and interest rates control the market sentiment driven by people’s fear paying too much or missing out.

 

Buyers and sellers only get what they wanted if the asking price and the market price are balanced to match the circumstances.

 

 

Asking price and negotiations

 

The challenge for sellers is to hit the market with the right asking price. That might be difficult as the seller is emotional attached to his property and fears to undersell. Is the asking price too high, buyers walk pass by and miss out the chance to fall in love with the property on the market. The house then sits quietly until the seller lowers his expectations and the asking price. That often backfires while property listings get the highest attention at the beginning.

 

House hunting online is easy. Potential buyers can set alerts for new listings and real estate agents send out new listings to everybody who wants to be on their list. As soon as a sales listing remains unsold and becomes stale that opens for buyers opportunities to negotiate with the seller.

 

If a property is sitting on the market for a considerable time and the seller has already reduced the asking price to attract buyers then the chances to negotiate the price are even better.

 

I would recommend to monitor your preferred street or area. With that insider knowledge you are able to make the right first price offer. Practice is needed and frustration sometimes kicks in—eventually you will find a match, the right house, and the right price. Be positive. Good luck

 

 

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Average or Market Pricehouse do skew the average downwards