6 Real Estate Myths Debunked

The state of the real estate market is a hot topic and everyone has an opinion. There are many common real estate myths out there that may cause problems along the way. The danger with believing everything you hear or read is real estate myths can cost you money when it's time to buy or sell a home. But, I’m here to help. In this guide, we’ll break down some of the most common and provide true and accurate information. Let’s take a look at some of these myths, in no particular order:

Myths

1. It’s better to get pre-approved after you find the perfect house to buy, there’s plenty of time before closing to get that done.
2. Start with the lower offer when trying to buy a home, you’ll just offer more when they counter.
3. It’s better to price your house on the higher side when selling, in this crazy market you’ll just get more for it.
4. Renovating and updating my house will definitely net me more when I go to sell.
5. It’s safe to skip the house inspection if the house looks good, seems to be what people are doing in order to have their offer accepted.
6. Cash is king and there is no way to compete against an all-cash offer.

Myth 1: It’s better to get pre-approved after you find the perfect home to buy.
Reality: It is essential to get pre-approved before you begin your home search, so you know your budget and can act quickly when you’re ready to make an offer. It makes your offer to sellers, too.  

In fact, many sellers won’t even allow buyers who are not pre-approved to tour their property. So, needless to say, an offer without that letter from your lender saying you are qualified will not make it past go or collect $200.  

In this fast-paced market, it takes a team approach to get that offer to mutual acceptance. When your mortgage lender and your Realtor operate as a team it can take an offer to the next level, it is that communication that allows lenders to know what their clients are trying to obtain and agents what their clients can truly afford…together getting the job done. I love nothing more than when a client works with my preferred lender, I have no problem calling at 9 pm on a Sunday to make sure that the pre-approval letter is on its way, Netflix can wait!

Myth 2: Start with the lower offer when trying to buy a home, you’ll just offer more when they counter.
Reality: In a competitive market like we have today, you may not get a second chance.

The buyers' agent must help their buyers negotiate the property for the lowest, best price, and the sellers' agent’s role to get their client top dollar for their sale. No one wants to offer more than they want to spend or think necessary? But how much is enough? This is where your Realtor’s communication skills and market knowledge come into play. 

Knowing what the market is doing can vary from neighborhood to neighborhood.  It is that knowledge coupled with communication with the listing agent that can make all the difference in nailing the appropriate offer.  

Escalation clauses are certainly a common practice these days.  

An “escalation clause” states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn't agree to pay more money than they can afford.

However, many agents are putting the hammer down on these clauses and asking that they not be included and that agents are to submit the highest and best offer for their clients. In a time when a home can draw 10-20 offers no one has time for that back and forth and chances are great you won’t be given that opportunity. The answer, hire an agent who will take the time to put in the work necessary for getting you to that perfect number.

Myth 3: It’s better to price your house on the higher side when selling, in this crazy market you’ll just get more for it.
Reality: A house that’s priced competitively will likely sell faster and attract multiple offers.

Buyers are savvy…with everything online and searchable the consumer can sniff an over-priced home.  By pricing at market value you will appeal to a larger pool of buyers and be much more likely to land in a multiple offer situation. So if your home is priced at market value it will generally sell faster. Though of course leaving money on the table doesn’t usually sit well with most sellers. 

Pricing your home too high typically results in far fewer showings and most of those do not generate offers, generally spending much more time on the market. All of this can result in a lower sales price when it does ultimately sell, as time on the market and price reductions tend to leave buyers believing there is a deal to be had by offering below even reduced pricing.

Pricing your home correctly from the start ensures your home will sell in the shortest time possible for the best possible price. 

By working with an agent and team that knows the market and area like the back of their collective hands you can trust that the pricing will be handled with care and skill.

Myth 4: Renovating and updating my house will definitely net me more when I go to sell.
Reality: Some renovations may be necessary, but not all of them. Your agent can advise you on what’s important to fix before you sell, and what’s not.

There is something to say about an updated master bathroom and a kitchen that has all the bells and whistles. But, if this is something you are contemplating so that you can put a for sale sign in your front yard for top dollar, think again. Many of the major remodeling projects homeowners embark on in search of Magnolia Home perfection cost more money than will be recouped by those added features in the sale.

Home Improvement Return on Investment

Figures are national averages Source: Remodeling Magazine (www.remodeling.hw.net)

In a buyers’ market, these projects can have more of an impact, but in this strong sellers’ market, no heroic efforts need be taken. Don’t get me wrong, repairs are a different story. 

Your home should be in its best condition with care taken to remedy things that could get in the way of a smooth inspection – but leave the new backsplash selection to the new owner, after all, you don't know if they are white subway or metallic hexagon tile types.

Not sure what makes the honey-do list and what’s best left off? That is where your agent comes in. Months, or even a year, before putting your house on the market, ask your agent to pop over for a visit and take a look. That walk-thru can save you time and money on renovations best left to the discretion and wallet of the new owner.

Myth 5: It’s safe to skip the house inspection if the house looks good, seems to be what people are doing in order to have their offer accepted.
Reality: You shouldn’t be so quick to skip the inspection. It could uncover problems that might cost you big down the line.

With demand high and inventory low, some buyers are opting to waive a home inspection to make their offer more attractive to the sellers. Of course, this would appeal to the sellers who can stand to avoid costly repairs and lengthy negotiations. But ask just about any expert and they’ll tell you why waiving an inspection isn’t in your best interest.  

Inspections can bring up several small repairs and items that cost very little to fix, but it’s often the safety concerns and big-ticket items like a leaking roof or crumbling foundation that can set any new homeowner back financially. Even if one knows the seller isn’t going to take care of any repairs having an inspection allows buyers to know exactly what they are getting into.

It’s true: Keeping a home inspection contingency in your offer can make you appear less appealing to a seller. But it is possible to get the seller to say ‘yes’ to your offer without waiving the home inspection. Ask your agent about the inspector they use most often, if that’s a strong relationship that inspector will work quickly to get the home inspected and the report in the buyer's hands within days of mutual acceptance, giving the seller peace of mind that the contingency will soon be waived.

Myth 6: Cash is king and there is no way to compete against an all-cash offer.
Reality: While sellers surely appreciate an all-cash offer there are ways financed offers can ultimately win.

This season in real estate has brought all kinds of tales of cash offers that leave people scratching their heads and wondering how they’ll stand a chance.

Aside from the fact that a cash sale doesn’t involve the lenders, approval process, and paperwork for days… a cash buyer can offer an amount well over asking and the seller can say thank you all the way to the bank. The issue with the financed offer is this. The bank is only going to lend as much as a house appraises for. If an offer is well above the list price for a home the seller justly worries that if the appraisal doesn’t come in at the offered, higher amount the sale of the home is at risk and the deal could fall through. It comes down to this, all-cash means no appraisal is required.

This has been the season of the 22-AD addendum. The 22AD is basically you pre-negotiating how much extra cash you are willing to bring to the closing table if the appraisal comes in lower than the amount you offered for the home. Let’s say there is a home that is listed at $500,000 and you offer $525,000, you attach a 22AD to your offer for $25,000. If the home appraises for the list price of $500k, that means you have agreed per the 22AD to bring that difference of $25k loss to closing, in addition to your down payment. This looks great to the seller because they are not losing that $25k. Theoretically, if you hadn’t attached a 22AD to your offer, the deal could fall apart due to the appraisal coming in lower than the amount offered.

So while cash may remain king, the 22AD is currently reigning supreme in the world of financing, with no signs of stepping down anytime soon.

The reality of these scenarios is that if you partner up with an agent and team that you trust you won’t be left to wonder if you should have done something different to secure that house of your dreams or negotiated in a way that would have resulted in more money in your pocket. The Key2see team would love to be the ones to guide you through it all, we’ve got you covered!