Business brokers and real estate personnel share common interests and knowledge about things like interest rates, investment growth, legislative changes and employment in the community, things that will affect you as a buyer or seller.
In a buyer’s market, there are more businesses for sale than there are buyers. Many factors influence this. Another advantage is that in a buyer’s market, prices are often down. A broker can help you, as a buyer, look at several options and take the necessary time to discover what is right for you. A broker will help you analyze the potential of this specific business in this ‘down’ market.
In a seller’s market, there are fewer businesses for sale and, usually, a larger pool of buyers. The factors producing the seller’s market may be sustained low interest rates; high employment rates, legislative changes which make it easier to purchase or manage the business and events and conditions that make buyers think NOW is a good time to buy a business. A seller’s market may make buyers compete for a business, driving the price above expectations.
Business brokers are the first to notice whether it is a buyer’s or seller’s market. That’s their business. Any change in the market affects how they work with their clients and customers.
The statistical measure they use to determine what kind of market exists is called the Sales-to-Listing ratio.
In any given month or period, a comparison is made to the number of sales to the number of new listings. If there are 55 sales for every 100 listings, or 55%, it is considered a seller’s market. If the result of the comparison is 35% or lower – that is, 35 sales for every 100 listings – it is considered a buyer’s market.
Anything between 35% and 55% is considered a balanced market.
Whether it’s a buyer’s or seller’s market, your broker can give you an edge by helping you highlight your business’s strengths–whatever they are–in this particular market, if you are a seller, and help you determine and find which business(es) would do well in this particular market if you are a buyer.