Real estate is full of myths and misconceptions
Real estate is a tricky business because it involves large sums of money changing hands. The single most valuable asset most people own is their home. To put it another way, your house is likely the most expensive purchase you will make in your entire life. People are attracted to the industry because it’s easy to imagine making a lot of money when your commissions are based on such large transactions.
For every honest real estate professional making his or her mark on the industry, there are probably four or five kooks, gurus, and wannabes dispensing bad advice to the uninformed. See if you’ve ever spotted anyone perpetuating one, or all, of these five common real estate myths.
Myth #1: It’s cheaper to buy or sell without a real estate agent
The first question you need to ask yourself if you’re thinking about buying or selling on your own is “how much is my time worth?” Sure, you’ll save the agent’s commission for yourself, but that doesn’t mean you’re not going to have to earn it. A lot goes into buying and selling houses. You might be a smart person, a doctor or a lawyer even, but that doesn’t mean you can play real estate agent in your off time and expect to be successful. Are you prepared to do market research? To spend time listing or searching for your home? What do you know about staging a home before you show it? How much time do you have to show your home? Even if you know everything you need to know, you will still be lacking the experience it takes to make the home buying, or selling, process as smooth as possible for all parties involved. That and all it takes is an expensive mistake on your paperwork to make you wish you hired a real estate agent to begin with.
Myth #2: Putting 20% down is the least expensive way to buy a house
It’s not true because nothing is one-size-fits-all in real estate. Depending on the buyer’s finances, it doesn’t always make sense to put a huge payment down on a house. Don’t be pressured into raiding the kids’ college fund to put money down on a house. At least explore your options first. There are basically two ways to reduce your mortgage payments. The first is to reduce the initial principle of the loan. Big down payments are great for that. But qualifying for a lower interest rate will also go a long way toward reducing your payments. And putting big money down doesn’t always mean you’ll qualify for a better interest rate. If it’s a lower rate you’re after, look into mortgage insurance to reduce your lender’s risk. Lenders are generally willing to loan at a lower rate to buyers who secure mortgage insurance.
Myth #3: Always low-ball the seller with your offer
Not only are cheap people annoying, they also tend to be disappointed constantly because they’re not willing to pay to get what they want. Of course everyone wants a good deal, but a good deal doesn’t mean making a seller take a huge haircut on the home you want to buy. Instead of trying to low-ball your seller, your goal should be to make a fair offer based on current market conditions in the neighborhood where you want to buy. There is always a time and a place to low ball a seller. Unfortunately, in today’s tough real estate market, with low inventory and high demand in many parts of the country, now is not the time to low-ball sellers unless you want to be perpetually disappointed.
Myth #4: It’s always better to buy than to rent
This is true when home prices are going up and up and up, which was probably true for most of your life. So for most of your life you’ve been hearing that homeownership is your ticket to wealth. And now the game has changed. Most people who buy these days aren’t buying for financial reasons, anyway. They’re buying for the sense of “home” that comes with owning your own home. Before you buy, think carefully about how much time and money you will end up spending on maintenance and repairs. The juice isn’t always worth the squeeze, especially when you’re young and there are more fun things for you to do with your time. Think long and hard about whether or not you want to trade weekend nights out for mowing your lawn and fixing your sprinkler system, among other things.
Myth #5: You get more for your money in the ‘burbs
The answer to this myth depends on your expectations and what you really want. It’s true that you get “more house,” but suburban houses are often build cheaply and on cheap land. That and the farther you remove yourself from jobs, family, friends, and entertainment, the more money you end up spending on gas. And you end up spending more time to get to where you want to go. For a lot of people, it’s worth it to pay a little more to own a smaller home in a neighborhood closer to where the action is.
Kamiel Moore is a real estate expert who can help you sell your house. She loves cupcake shops, reality TV, and using her passport when she goes on vacation.