Certified Residential Appraiser Practice Exam

In which type of market can sellers command higher prices due to limited supply?

1. Balanced Market

2. Buyer's Market

3. Seller's Market

4. Overpriced Market

The correct answer is: Seller's Market

In a seller's market, demand for properties exceeds the available supply, giving sellers the advantage to command higher prices. This situation arises when there are more buyers looking for homes than there are homes for sale. Factors contributing to a seller's market include low interest rates, a strong economy, and limited housing inventory. As prospective buyers compete for the fewer homes on the market, they may be willing to make higher offers, often leading to bidding wars that drive prices up further. In contrast, a balanced market indicates equilibrium between supply and demand, where neither buyers nor sellers have a significant advantage. A buyer's market occurs when supply exceeds demand, which typically leads to lower prices and sellers needing to offer incentives to attract buyers. An overpriced market describes a scenario where properties are listed at values that exceed what buyers are willing to pay, often due to inflated expectations, rather than reflecting the dynamics of supply and demand impacting pricing power.