Let’s bust some real estate myths, shall we?
Here we’ll tackle the big 20 real estate myths that are most prevalent today. Some will explode! Others will simply crumble…
Myths about buying vs. renting
First we must decide whether or not we should actually buy a house. After all, lots of people are renting. In fact, that percentage is rising. Don’t let these real estate myths about renting trick you.
1. It’s always better to buy than rent.
This decision has a ton of variables. How secure is your job? What price range are you considering? How many years would you stay in the house? Heck, that one is predicting the future, and we all know how hard that can be. Here’s another IL piece that goes into more depth. Suffice it to say, there are times where it makes more sense to rent, but not always.
2. Renting is cheaper than buying.
It can be. Or it may not. In some cities, rental rates are much higher than in others. Supply and demand fluctuate over time. Just throw this myth out the window because in a city like Louisville, with all things considered (including taxes), buying can easily be the cheaper option.
3. Real estate is the best investment.
“Best” is the key word here. Real estate is generally a solid investment for most people. There’s a quote that says 90 percent of millionaires use real estate to get there. There’s truth that real estate is almost universally part of the equation, but it’s rarely the highest performing portion in the portfolio.
Louisville real estate appreciates about 4 percent a year like clockwork. Well, other than those three housing recession years (2009-11).
Myths about home financing
Looking to buy a house? There are a lot of pitfalls along the way. Don’t let any of these home-financing myths trip you up.
4. My salary is too low to buy a house.
The best answer to this, and several of the following myths, is that all of your finances will factor into the equation. If you have a relatively low salary, you can still qualify if you also have low debt, a decent credit score and some savings. It’s the whole picture lenders consider.
5. I have too much debt to buy a house.
How much debt is too much? Is it student loan debt or credit card debt? Each one of these variables is going to be plugged into the spreadsheet of your loan specialist before the final verdict is handed down. The answer may be that you do have too much debt, but you won’t know until you ask.
6. My credit score is too low to buy a house.
Again, your credit score is a single piece of the puzzle. There are certain scores that are too low, but most people today are above these. Before you write yourself off, read Credit Score Needed to Buy a Home in 2016 to see where you stand. You might be in better shape than you thought.
7. I don’t have enough down payment to buy a house.
To avoid paying PMI insurance, 20 percent down is generally required. But without the 20 percent, you still have options. One great option just renewed is the KHC Down Payment Closing Cost Assistance program. Depending on variables, you could get $10,000 toward your down payment. Find a reputable lender to show you all the different ways you could go.
8. All I need is the down payment to buy a house.
One myth is that once I get the down payment saved, that’s all I need. Well … there are these other things called “closing costs.” Made up of prepayments toward taxes/insurance, title fees, attorney fees, taxes and some other items, closing costs can be anywhere from $2,000-$6,000 depending on the price of the home and the characteristics of your loan.
9. As long as I can make my monthly house payment, I’m good.
Here’s a tricky one many people think is fact. There’s actually more to owning a home than you might think. First, there’s potentially Homeowners Association (HoA) dues. Don’t forget the water/sewage bill that is often paid in apartments as part of a monthly rent. Other items can include: trash pickup, snow removal, landscaping and home maintenance costs. Be proactive and total everything up to make sure you’re good with the final number.
10. The 30-fixed mortgage is the best deal.
Often times the 30-fixed mortgage will be the right move for you. That doesn’t mean it’s the best deal. The shorter you can make the term of the loan, the less overall interest you will pay. So, if you can handle a 20-year or even 15-year mortgage, go for it. The dollars you’ll save in the long run will really add up.
11. Pick the loan company that offers the lowest interest rate.
The interest rate, while extremely important, isn’t the only factor that makes up your loan. There can be basis points. There will be fees. Your loan specialist will have all the options and will recommend the one that works the best for your situation. Depending on down payment amounts, the best path could be the one that’s not the lowest rate.
12. Pre-qualification is the same as pre-approval.
Don’t be fooled: These documents are meant to give the home buyer some financial credibility when putting in an offer for a house. One does it quite well. The other? It’s not worth the paper it’s written on. A pre-qualification is a quick and easy look at your general financial makeup. A pre-approval digs deeper and comes after completing the mortgage application. For more, check out “Pre-Qualified vs. Pre-Approved – What’s The Difference?”
Myths about buying
Now let’s look at the actual buying process and which myths fool people on a daily basis.
13. I don’t need a real estate agent to buy a house.
Technically, this isn’t a myth. Of course you could buy a home on your own. But should you? No. Why? Because the agent’s service is valuable and free for buyers. Why wouldn’t you take advantage of that? I know, I know, some will tell me they can get a better deal without using a Realtor, and they’ve done it before. I’m not saying it’s never happened, but if you believe that’s true, I have some swamp land in Florida I’d like to show you.
14. Agents who sell the most houses must be the best.
Real estate agents who sell the most homes make the most money for themselves. That’s irrefutable. But do their clients get the best service? Do their clients get the lowest price on the home they’re buying? Or … are the agents in a rush to get to their next closing? There’s actually an optimum point on the spectrum where experienced agents have the correct amount of time to accomplish all of their clients’ goals.
15. I’m building a house so I don’t need a Realtor.
Here’s a doozy. I hear about people falling for this one all the time. The lure is the idea that some people believe they will get a better deal without having representation. Actually, that is impossible to prove. Building a home is a complicated process, and a consumer can’t know if they are getting a better deal on new construction by not having a Realtor on their side.
16. My agent has to do everything I tell them.
A Realtor has a fiduciary responsibility to work in the best interest of their client. They also are small-business owners who need to make a living. The buying relationship is an agreement where the client has certain requirements of behavior, and so does their agent. Either can cancel the arrangement at specific points in the process, but a real estate agent isn’t required to do whatever a home buyer requests.
17. If I keep looking, eventually I’ll find the perfect house.
There is no perfect house. Everyone together now, “There is no perfect house.” Not sure why people believe this is the case, but every home has flaws. Every house has features we wish were different. Don’t believe the myth that if you keep house hunting you’ll find perfection, because it doesn’t exist.
Myths about selling
Thinking about selling your home? Here are three home-selling myths that fool people all the time.
18. If I sell the home myself, I’ll make the most money.
Selling without an agent only makes sense in a small number of situations. The majority of the time, home sellers will make more money (even after commissions) and have a quicker sale with less stress if they hire a professional. In all of life, the more complicated the process, the more it pays to have a professional guide you.
19. Always price your home above market value to allow for negotiation.
This home-selling myth is prevalent … even among some real estate agents. The key word here is “always.” There are times when it is better to price your home at (or sometimes below) market value to attract buyers, increase competition and force the price higher. Also, depending on your next move, there are times when it’s more valuable to sell the current home quickly than it is to take longer and sell for a higher number.
20. Don’t spend money updating, just drop the asking price.
Dropping the asking price is easier, most definitely, but it doesn’t always work. Markets are moving in favor of “move-in-ready” properties. If your home needs some updating, it may benefit you to get the work done and sell at a higher price. As is the case with most of these real estate myths, all the relevant factors need to be considered before charting the best course of action.