Selling a House in a Buyer's Market

Selling a house in a buyer's market means you will likely have to sell for less than you would have liked. This is an unfortunate reality when a buyer is the one with control. Regardless of the perceived value you may feel your home offers, there are several factors working against you in a buyer's market. These factors range from the number of cheap homes on the market competing with yours to the challenges buyers will have seeking a mortgage.

Foreclosures and Short Sales

A buyer's market is an indicator of a recession. Even a very small recession can represent large problems for a seller. The recession means some people will be out of jobs. Even a one percent change in the unemployment rate will result in foreclosures and short sales. This means there are a number of extremely discounted homes on the market. These homes may be as valuable as your own home, but they will be going for a fraction of the price. In turn, you will have to drop your home price in order to compete. Buyers on the whole are looking for a deal, and if you cannot offer it, they will look elsewhere.

Upside-Down Loans

You may be one of the unfortunate borrowers who falls victim to a small recession. In particular, you are at risk if you have failed to pay off your mortgage loan at a quick pace. When the home's value drops, you may find you owe more on your mortgage than your home is currently worth. Holding on to the home until it recovers value would be the best option; at times, this option is not available to you. Selling your home when you are in an upside-down loan situation is extremely stressful. Failing to sell the home for a profit means you will owe the mortgage lender additional money in order to successfully close the loan. 

First-Time Home Buyers

Buyers markets are particularly favorable for first-time home buyers. Since they are not concerned with selling an existing asset, they have complete freedom to capitalize on the depreciated market values. To you, this may mean dealing with an inexperienced homeowner. These individuals often seek to place very low offers on homes. Since they are not operating on a time line, they have the luxury of waiting for the right seller to say "yes" to the low offer. An influx of first-time home buyers often lowers the average sale price of homes as a result.

Mortgage Challenges

When home prices are low and the market is recessed, the credit industry takes a hit. Borrowers will have a hard time qualifying for loans. You may even have a challenge qualifying for a mortgage for the next property you purchase after selling your existing home. This can present multiple challenges such as a number of contingencies in closing contracts. The sale may be contingent on the borrower's receiving approval on a grant or high-risk loan. You may even make the offer contingent on personally receiving a loan for your next home. Though not necessarily bad, contingencies do complicate home sales in a buyer's market.