The Encyclopedia of Commercial Real Estate Advice

ENCYCLOPEDIA TOPIC BDue Diligence

Buyer's or Seller's Market: Are you buying or selling in an up or down market?

Recessions happen on average every six years. So up cycles are followed by flat cycles, which are often followed by down cycles. Is there any good reason to buy in a seller's market? Yes! But you need to work a lot harder to find properties that you can add value to without spending too much cash (see Chapter 7). In a seller's market, there is more demand than supply, resulting in a scarcity of decent properties. If you are selling in a seller's market, you are in the best place at the right time. You can get a good price just selling your property as is—even if you have too many vacancies or shorter-term leases. Let's say your property is a fixer-upper. In a seller's market, it will likely go for more than it is worth to someone who wants to renovate it in hope of raising rents.

In a buyer's market, there is more supply than demand. Now the buyer is in the best place at the right time and has a better selection of reasonably priced properties to choose from. But you might want to hold off on buying at the beginning of a recession; prices are likely to fall further. You won't know for sure that they've they hit rock bottom until they start going up again. If you are the seller, you better spruce the property up and get solid leases in place before putting it on the market. You might want to wait until it is a seller's market to sell. Is there any good reason to sell ...