Certified Residential Appraiser Practice Exam

What is the primary characteristic of a seller's market?

1. Rapid price declines

2. High inventory of available properties

3. High demand and low supply of properties

4. Bargain pricing opportunities

The correct answer is: High demand and low supply of properties

In a seller's market, the primary characteristic is high demand coupled with low supply of properties. This situation arises when more buyers are looking to purchase homes than there are homes available for sale. As a result, sellers have the upper hand, which typically leads to increased competition among buyers. This heightened demand often results in rising home prices, as buyers may be willing to offer more to secure a property. The dynamics of a seller’s market can lead to situations such as bidding wars, where multiple buyers submit competing offers, often driving the sale price above the asking price. This contrasts with other market types where there may be either balanced conditions or more supply than demand, leading to different pricing strategies and opportunities for buyers. Understanding the characteristics of a seller's market is essential for appraisers as it affects property values and market trends significantly.