Buyer’s Market Behavior

For the last few years we have had an excellent real estate market here in Pittsburgh, with a sort of equilibrium between buyers and sellers. Seemingly, there was just the right mix, enough buyers for the number of homes on the market and vice versa. Today, however, for whatever reason (I think mostly psychological), there does seem to be more product on the market than ready, willing and able buyers. So what does this mean, really?

Well, in an extreme buyer’s market, things could get rather bloody. When the equation gets lopsided to a wild degree and the number of homes on the market dwarf the number of buyers looking for homes, it becomes a negotiation free-for-all, where home values plunge as home sellers grapple with one another for the limited number of buyers available.

Fortunately, we aren’t facing that situation. We are only slightly out of equilibrium, which translates into homes staying on the market marginally longer, which, of course, means increased stress and frustration for home sellers. Buyers, on the other hand, can lie back a little and take time to consider their purchase, a luxury they seldom have when the market is hotter.

This isn’t necessarily a good byproduct of the buyer’s market, as buyer’s remorse is a very real phenomenon. An old trainer of mine once told me, “No house is good enough to sleep on overnight.” Of course, he was using hyperbole to make the salesman’s point of going for the close. However, there is an element of truth in what he said. The purchase of real estate is such a large transaction and decision that it can be frightening, especially for the neophyte. As a result it is very easy to talk yourself out of making a purchase if you think about it too long, and in a buyer’s market, there is a tendency to convince yourself that a better home will be coming along if we just wait a few days.

Agents, incidentally, aren’t that crazy about buyer’s markets. Although few things are as frustrating for an agent as having a good buyer and having no homes to present to them, a buyer who can’t make a decision is right up there on the frustration scale.

So how should the various parties to the real estate transaction behave in the sort of buyer’s market we face today? Let’s first consider the buyer. As mentioned earlier, there is a natural tendency to want to wait and see if something better than the home you just saw is coming along. Is that possible? Sure. Is it likely? I can’t say, but consider it this way: if you are in the market for a resale home that is already in existence, and you have a laundry list of things your dream house must have, you’ll be lucky if your ultimate purchase represents 80% of the items on your list. People make all sorts of trade-offs every day. Let’s say your list says that you want a two-story brick colonial with three bedrooms, a first floor family room, two baths and a rumpus room in the basement. You haven't found that house but your agent did find you a two-story brick and frame colonial with three bedrooms, a first floor family room, one and a half baths, no rumpus room, but a really cool covered patio with a private fenced yard. So you take it, because you’re not building a new home and this one is very close to what you wanted. If you can’t make this decision you will never buy a home, because the possibility of a better one coming along always exists and besides, have a little compassion, you are driving your agent beyond the edge of sanity.

Now, how about the agent? For you life is a little different than it has been. In a hot market, product is flying off the shelves because a buyer can’t wait too long; another buyer will be scooping them any minute. Now, as I have said, the buyer can afford to be more deliberative, so don’t lose your patience. Actually, this market is a test of how good you really are. I’m not suggesting that it is a test of your sales ability, as I don’t believe homes are sold, but rather, bought. What I’m saying is that this purchase is too significant to be influenced by high pressure. We are matchmakers; when you present the right house to the buyers they will purchase it. In this market your test is, how well can you help them work through the decision making process. Reminding them of what they stated they were looking for and then logically showing them how this property meets most of their needs is the way you guide them to decision.

Lately, I’ve had buyers tell me that they think their agent was just lazy, not wanting to put in the effort to find them the right house. I don’t agree; most agents are quite caring and professional. After all they don’t get paid for NOT finding you a home, but they are also human and if your indecisiveness causes them to conclude that you will not make a decision, self-preservation tells them that they must move along to a more motivated buyer. Don’t allow it to get to that point. If you are a serious buyer, take the time to sit and have a discussion with your agent regarding the reasons for your hesitation; you can work through it.

As for the seller the advice is simply – patience. It is going to take a little longer, but don’t fire your agent; the buyer is coming, just not as quickly as we had been used to. Further, when that buyer does arrive, negotiate seriously and thoughtfully; there may not be another one for a while.

Gary Straub is an independent real estate consultant and real estate professional for 36 years.