Facts About Buying and Selling A Home That (really) Aren’t True
How can something be a fact, but not be true? In the internet age, it’s very possible to find many so-called facts that don’t really hold true in real life…especially regarding real estate. So many people have so much to say, but don’t really know what they’re talking about. Yep. I said it. BS Facts abound on the world-wide-web.
Two reasons why non-facts linger: Old news lasts a long time on the internet. The problem is that any local real estate market can change on a dime. As well as market changes, its also true that markets are very local. All Real Estate is Local. What is fact in one market may not be in another.
Here are some of those so-called facts that I’ve run into lately…and along with them, some truth. I’ve brought in some of my favorite real estate bloggers to help me expose and dispel the BS:
BS Fact #1: “Homes are way overvalued today, there is nothing I can afford.”
In 2013, most recovering markets saw large gains in home prices, many as much as 11-12%. That market correction hasn’t continued in 2014, and isn’t expected in 2015, either. With the combination of low interest rates, home affordability is still a reality for middle-income Americans. Although affordability is bound to decrease, compared to historic values and interest rates, home affordability is still very good. Consider:
“At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.” ~ Frank Nothaft, Freddie Mac VP and chief economist
BS Fact #2: “New homes are not being constructed. I’m just going to wait until builders start building again.”
Builders are building. Builders are targeting different demographics, including first-time home buyers. Many are prepared to make up for lost ground of the last decade by building homes that people actually want. D.R. Horton is one such builder, with a focus on the entry-level market, launching “Express Homes”, which are priced between $120,000 and $150,000, much lower than the national median new-home price of $290,000.
NAHB, National Home Builders Association, has been predicting positive outlook for new homes throughout last year, reporting month-over-month increases in housing starts and completions during 2014. Consider: Single Family Production is Poised to Take off in 2015.
In Frederick Md, we’re seeing new home construction like we haven’t seen since pre-2006.
BS Fact #3: “My house is worth much more than the neighbor’s house because…[insert any of 2 dozen reasons].”
Sellers don’t determine how much their house is worth. a) Buyers do, and b) Appraisals do. Lenders must have appraisals to establish a value that the bank uses to decide if they want to loan the money or not. Buyers make an offer based on what they are willing to pay for the home in the present market. These two factors determine a home’s value. [Not to say that improvements aren’t taken into account, but the process of determining value is far more entailed than many sellers realize.]
For Additional Reading on the appraisal process:
- What Appraisers Look At During A Real Estate Appraisal, by Bill Gassett, Metrowest Mass. Realtor
- Tips For Dealing with Low Appraisals – for Buyers and Sellers, by Debbie Drummond, Las Vegas Realtor
- An Interview with An Appraiser, by Lynn Pineda, Coral Springs FL Realtor, and Ryan Lundquist, Sacramento Appraiser [Sacramento Appraisal Blog]
BS Fact #4: “We’re headed for another housing bubble!”
It seems like any time there is positive movement on home values, even if it’s a measly one percent, we have cries for the next housing bubble. Our collective psyche will never be the same after the previous decade of housing woes. Although we have sites like The Housing Bubble Blog, and Trulia’s “Bubble Watch”, the preponderance of economic reports are saying “No to another housing bubble”, Trulia, Forbes, Inman, and Kiplinger are just a few.
Here’s another thought…with so many eyes on the potential of a real estate bubble, and so much intervention by the Fed, do we really need to worry about bubbles so much? Can we enjoy a little real estate recovery without so much angst? Tweet That!
Now, this is a housing bubble I can dig! From 1972:
BS Fact #5: “I’m waiting for mortgage rates to fall.”
All indications are that mortgage rates are on the rise. Since the Fed stopped buying up government securities (Quantitative Easing) they are predicting rising rates. By waiting around for 3% rates, a potential buyer is taking a great risk that the cost of a home is only going up, and they may well be priced out of the market in the near future.
Additional Reading: Three Mortgage Rate Predictions from 3 Industry Experts, Tim Lucas at My Mortgage Insider, Brad Yzermans at Home Loan Artist, and Luke Skar, Madison Mortgage Guys.
BS Fact #6: “I was told it’s a bad time to buy (or sell) real estate.”
We’ve been hearing similar statements for years. It fascinates me how a single negative factor, among thousands, can overshadow the entire subject of real estate for some people. They draw large conclusions from one anecdote.
An example: Your neighbor refinanced several times during the boom and is now underwater on his mortgage because the house isn’t worth that amount anymore…and probably won’t be for a few years. So he concludes for you that “it’s a bad time to sell.” Well, yes, for him it is, but that’s not the case for everyone.
BS Fact #7: “I can’t buy a house yet, I don’t have 20% to put down.”
Some of the well-known advice columns lead people to believe that they must have enough cash saved to put 20% down on a home purchase. While that might be the ideal situation, and certainly the best case scenario, that is not the only option. Very few have that amount, especially first-time buyers. There are many loan programs available that require less than 20% for a down-payment.
- FHA loans require 3.5%. Fannie and Freddie Mac are now backing loans with 3% down.
- VA requires 0 down, zero, nada. A wonderful benefit for those who have served us and kept our freedom.
- There are Conventional loans for 20%, 10% and as little as 5% down. Add to them gifts from parents or other down payment assistance and they can be as little as 3% down.
- Speaking of down payment assistance programs, there are many. Consult a local lender to find them.
Related Article: Where Mortgage Down Payment Assistance is Still Available, Lender 411
BS Fact #8: “But the online Valuation of my house was more than you’re telling me?!”
Zestimates are more than 10% off about 1/3 of the time. Tweet That! On the Eastern Shore in Maryland, they are a whopping 42% off! If any Realtor was that far off, they would not be in business for very long! All I have to say is this emphatic statement:
Online valuations can never take the place of a local professional CMA, comparative market analysis.
- My own article with an overall view of online marketing
- this earlier Washington Post article,
- and this most recent article in the Washington Post,
- this List.ly Articles:
BS Fact #9: “All mortgage lenders are the same. I’ll just choose the one with better rates, lower fees, brightest smile… etc.” At the risk of bringing down the positive vibe…all lenders are NOT the same. If you’ve ever had to make the phone call to your seller a week before settlement, and tell them that the buyer’s financing fell through because of a lender’s incompetence, you know that the facts say otherwise. Although rates are very competitive, all lenders have varying experience. From our perspective, the most important thing is that there are no surprises. There may be challenges, but we can overcome challenges. As Realtors, we’re interested in the entire team you’re working with, and the more we can count on the other real estate professionals involved, we find that the bumps in the road are hardly noticeable.
- Don’t Choose a Mortgage Lender for Their Sales Gimmick, by Colin Robertson, California Lender, on his excellent site: Truth About Mortgage
- Shopping Around: How to Compare Mortgages from Different Lenders or Underwriters, by Sean Young, Colorado Lender
- Know What Questions to Ask Your Mortgage Lender, by Inlanta Mortgage, Madison Mortgage Guys.
BS Fact #9.5: “All Realtors are the same.” See BS Fact #9, only replace Realtor for Lender.
BS Fact #10: “There are too many foreclosures dragging prices down, I’ll never get what I want for my house.” According to Daren Blomquist, VP of RealtyTrac, foreclosure filings have been falling every month in 2014, and there’s no reason why they won’t continue to fall throughout 2015. “Foreclosures will likely fall to pre-crisis levels in 2015.” The drag on home values from foreclosures is virtually non-existent.
BS Fact #11: “Staging my home should bring me a higher sale price.” Although staging a home is advisable, and will serve to present the home in it’s most positive light, there is no evidence that the favorable presentation will net a higher price. There is evidence that the home may sell more quickly, and may win out over other homes in a competitive market, so staging is often well worth the effort. Remember, whatever the offer on a home, unless the buyer is paying cash, the home must appraise for the buyer’s loan to get funded. (See BS Fact #3)
BS Fact #12: “A real estate agent will try to make me pay more so they can make more money.” This is a statement that I see often in online forums…from people who have no idea how a real estate agent works. Many people make the mistake of comparing real estate agents to car salesman, or insurance salesman. Here is (one of) the differences: We want to be your Realtor for life! We want you to be so ecstatic with our service that you tell everyone you know about us. We don’t get that result by doing anything but serving your best interests.
Let’s just say that we could push you to a higher price point, given that you qualify. If you spend $10,000 more on a home than you thought you wanted to…your Realtor might make $300 more.
Who in the world would risk their reputation, further business and recommendations, and their integrity, for $300? Not me. If a buyer will refer me to someone else, I stand to make thousands, not just $300. As real estate professionals, we are local business people. We have to live in our communities, see past clients at the grocery store, the hardware store and the little league games. We care about so much more than a few more dollars on our commission.
BS Fact #13: “A real estate agent will underprice my home just to make a quick sale.” See BS Fact #12. Reverse it to $300 less.
BS Fact #14: “I’ll need to spend a fortune to update my house, I can’t possibly sell it and break even.” I call this problem: Too much HGTV! While home sellers need to make sure their home has the right updates to compete in their market, it doesn’t have to be costly. There are updates that are necessary, but if they cost so much that you can’t get the home sold and break even, then you don’t need to do them. Much has been written on this subject by experienced real estate agents:
- Avoid Over Improving Your House, by Tina Israelson, Orlando Florida Realtor
- Home Improvement Projects to Avoid for Resale, by Kyle Hiscock, Rochester NY Realtor
- The 6 Best Time-Tested Remodeling Projects — and the Worst, John Riha, HouseLogic
And the mother-of-all BS Facts…#15: “Who needs a Realtor anyway? I’ll do it myself!” Well, that is true, anyone could sell their own home. Anyone could also cut their own hair, make their own shoes and put a new roof on their own house…I’m just not sure I would advise it. We each have our skills, training and talents.
Realtors negotiate and buy and sell 24-7, 365 days a year. Realtors are professionals with experience in marketing, contracts, negotiation, contingencies, time-frames, loan programs, and a number of other elements. Not to mention, they bring a team of professionals to the process…lenders, title attorneys, home improvement, stagers, painters, and many more.
The average homeowner buys, sells, negotiates and maneuvers through the process once every 7 to 9 years. Find a Realtor you can trust and let them do the heavy lifting. How to find that real estate professional?
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