There are many so-called “experts” in real estate. Dig around a bit and you are likely to find out that an “expert” is about as far away from what they truly are… They will tell you how to make millions buying and selling with other people’s money but don’t have their own home to stand in, and a 500 credit score to prove it. Sounds harsh, I know – but it needs to be said. Buying and selling real estate can be a very profitable investment when done right. So don’t believe everyone you see on youtube or on your favorite reality real estate show. Instead, come to me… I’ll give you the truth. I’ve got 20 years of experience behind me and boots on the ground today to help and assist you.
We’ve put together a list of common misconceptions about real estate so you can cut through the noise and make the best choices for yourself. These are our top myths about real estate debunked.
Myth One: The First Step Is Finding The Home
Finding your perfect home is exciting, and it might seem like the first step. Find a home you want, and figure out how to get it, right? Not quite. In fact, the very first step you’ll want to take when looking for a home is determining what you can—and perhaps more importantly—can not afford. Once you know your budget, then you can find a home that’s in your budget.
There are many ways to gauge financial readiness, but a very common benchmark number is what’s known as your debt-to-income ratio (DTI). There are numerous resources to help you determine your personal DTI, but this benchmark accounts for how much you earn each month, and how much you will need to put towards your debts each month.
A lower DTI means you are spending less of your income each month on debts, and are more likely to be able to afford to keep up with a property you purchase.
Myth Two: Schools Don’t Matter If You Don’t Have Kids
Real estate listings often put lots of focus toward schools nearby and home school districts. If you don’t have children of your own, you might think this is something you can disregard. In fact, you’ll want to pay attention, as the schools near your home may affect its value, regardless of your involvement with them.
There is strong evidence suggesting proximity to higher-performing schools is positively correlated with home values. In other words, a home’s value may be tied to the quality of schools nearby. Whether you’re looking at it as a long-term investment or not—if you want the value of your home to go up more after you purchase it, pay close attention to the schools nearby and the quality of the school district it’s located in.
Myth 3: Home Inspections Determine a Home’s Value
There are a lot of myths about home inspection. One such myth is that home inspections are like an appraisal and will determine the value of a home you’re looking at. In fact, appraisals are not inspections, and an inspection does not determine the value of the home. A home inspection is generally optional, but it’s prudent to get one done before purchasing a home.
A home inspection might tell you if the home is in need of serious repair or if it might be in need of repair in the future. While this is not an appraisal, it’s possible that something a home inspector finds might sway your desire to buy. While it isn’t required, finding a home inspector can be an important part of determining if a home you’re looking at is right for you.
Myth 4: All Agents Are the Same
Just as no two people are the same, neither are two real estate professionals. Whether you’re working with a buyer’s agent, who represents your interests as a potential buyer, or a listing agent who represents your interest as a potential buyer, it’s important to pay close attention to who you’re working with.
Buying and selling homes are complicated processes—fraught with confusing steps—and whether you’re a first-time seller or buyer, or not, the experience and personal fit of your agent will go a long way toward having a smooth experience.
Agents bring a lot of things to the table—professional expertise, professional networks of trusted colleagues, and perhaps most importantly, practical experience. Naturally, it’s important to work with a real estate professional who’s not only experienced and reputable—but also a good personal fit for you. After all, you’ll be working closely together during the process.
Myth 5: You’ll Always Need Twenty Percent For A Down Payment
t’s a very common idea that you’ll need to make a 20% down payment on a home you’re looking at purchasing, and while putting down 20% can be a good idea, it isn’t always necessary. Coming up with a 20% down payment can be a steep challenge, and one that may not be feasible for you—but there are other options available.
For instance, FHA loans will require mortgage insurance but can require as little as only 3.5% down and may have less strict credit requirements. A trustworthy and reputable realty professional can help you navigate the process taking into account your own personal financial situation.
Myth 6: Lower Commission Means More Savings
Each home is different, and so is each seller, each buyer, and each agent. There is no one-size-fits-all approach to real estate, but you may have considered working with lower commission fees as a potential seller in order to save money. While this logic may seem straightforward, the reality is a bit more complex.
There are a lot of factors to consider when you’re working with a real estate agent to decide on a fair commission. For one thing, some of that sales commission will probably go to the process of selling your home.
Cutting down on your agent’s commission can actually work against your best interests, as they may have fewer resources to work with while trying to get you the best price for your home. Some of the commission prices might go to things like marketing and showing your house, so beware of cutting down, when in reality it can affect your own bottom line when looking at selling a property.
Myth 7: Listing High and Offering Low Will Give You Wiggle Room
It’s a common misconception that listing high when trying to sell a home and offering low when trying to buy a home will buy you wiggle room to negotiate in. The fact is, buyers may be looking at homes based on a budget they’ve already determined. So if you’re listing high, hoping to make negotiations later, your plan might backfire.
Potential buyers might instead simply pass over your offer entirely, opting instead for something that is already in their price range. Likewise, if you lowball an offer on a home you’re seriously interested in, you might get passed up for someone else with a higher offer. Either way, you’ll want to come to the table in good faith, and take a more frank approach whether you’re selling or buying.
There is a lot of information out there about buying and selling real estate. While, of course, some of it is good, there’s also a lot of misinformation and myths that surround the real estate market.
Some myths have some grains of truth to them, but it’s important to understand the reality behind buying and selling homes. It’s a big step no matter where you are in life, so understanding some of these myths, the reality behind them, and what’s really important can make all the difference in the world when it’s time to buy or sell.