Real Estate Myth 14

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #14 -  Buyers should wait to secure loan approval until they’ve found a home they want to buy.

Fact - Many buyers want to find the “perfect” home before having their credit pulled, which can backfire when an offer is on the table and time is of the essence. It’s wise to get pre-approved for a loan even before you view your first home. 

Your credit report may contain inaccurate information that you were not aware of, which can be a time consuming process to rectify. Or, you might not like what loan program you qualify for, or you might qualify for a higher loan value than you thought. Ultimately, you will need a pre-approval letter with your offer, so do yourself a favor and do this in advance. It’s free, after all.

Real Estate Myth 13

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #13:  All real estate agents charge the same commission percentage.

Fact-- Not all agents - and agent packages - are created equal.  Every so often a caller wants to know what commission my office charges. Since I haven't even seen the property yet, I have to tell the caller that the commission is negotiable. One of my colleagues, when asked if he'll adjust his commission, cheerfully says "Sure!". And he offers to add two points to the original quote.  

From full-service agents to discount agencies, make sure you know the type of professional you are hiring and what exactly you are buying. An agent that can professionally market your home above and beyond the MLS listing will increase your exposure within the marketplace, which will lead to a higher selling price and less days on the market. Will your agent incur costs to give your home that visibility? Find out, so that you may take everything into consideration when establishing the commission percent. Despite what an agent might say otherwise, commissions are always 100% negotiable.

Real Estate Myth 12

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #12: All negotiations start with a buyer submitting an offer.

Fact-- Sellers do have ways to kick start a negotiation, such as a “Reverse Offer.” Consider that one buyer who has been back for a second or possible third look, but hasn’t pulled the trigger. Make them an offer! Yes you, as the seller, should put something in writing and submit it to the buyer’s agent. This will create an opportunity for the buyer’s agent to sit down with his or her client and potentially help close the deal.

Real Estate Myth 11

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #11: There is no real benefit to “shopping” for a mortgage among multiple lenders.


FACT - A difference of even half a percentage point can mean a considerable savings over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8% vs. 7.5% is about $35 per month. Over 30 years, that’s $12,600.

But unless you've done this shopping before though, your best course is to work with a reputable mortgage broker. The broker will shop for you to find the best possible rate for your situation.

Real Estate Myth 10

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #10: Never sell your home yourself (For Sale by Owner:"FSBO")

FACT - Never say "never."  If you know the marketplace, have the time and flexibility to do your own marketing and be at home to answer calls and let qualified buyers see your home, you can trade the time and inconvenience for savings on paying a fee to a real estate professional  for his or her time and professional service. But be willing to pay a commission to a professional who brings your buyer.

If you already know and trust a qualified buyer who is willing to pay your asking price, you won't need a broker.

Be sure to retain a real estate attorney to provide review all the forms required for a legal transaction. The attorney's retainer fee will eat into your commission savings, but again, if you have the experience and time to spend, why not pay yourself?

About 12% of all real estate transactions in the U.S. are FSBOs. Most FSBO sellers, though, say they'll go with a pro the next time.

Real Estate Myth 9

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #9: It's a terrible time to sell.

FACT - Wrong. In this market, homes priced correctly in Kitsap County are selling, and selling quickly.  For a seller wishing to trade up, selling low is more than offset by buying the new move-up home at a lower price. The market will recover, and when it does, appreciation on the new home will yield a good return. 

Consider: Homebuyers want bargains. If you price your home much lower than your competition, it's possible to start a bidding war. 

Real Estate Myth 8

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #8: It doesn't really matter if I get pre-qualified or pre-approved for a loan. I can do that when I find the home I want to buy.

FACT - It really does matter, and it gives you better marketability. 

Sellers generally do not want to take the risk of accepting an offer from an unqualified buyer. When you are head-to-head on multiple offers, the seller will give much greater weight to a pre-approved buyer. For starters, talk to your lender or call your Realtor for references.

Real estate myth 7

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #7: I do not feel comfortable signing a ‘buyer’s representation contract'.

FACT--Don't feel uncomfortable--ask for one!

This contract, called Buyer Agency Agreement, was not designed to protect the agent but rather to protect you as a consumer. When signed, it brings to your side a professional who will not only assist in the search for your new home but insure that your interests are always in the forefront with the different financing venues, contracts, inspections, negotiations--all the way through to the final closing day. One of the clauses is that your agent will not show properties of interest to you to any other clients who sign after you.

Real estate myth 6

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #6 An agent will try to sell me only his or her agency listings.

FACT - It depends on whom the agent represents. If it is the agent representing the homeowner (referred to as the Listing Agent), of course he will try to sell you his listing! That's why the homeowner has hired him.

Your buyer agent (referred to as the Selling Agent) represents you, not the homeowner. The Selling Agent earns commission only when you finally purchase a home. Your buyer agent will show you as many homes as you like, no matter which agency has listed them.

I have to confess that I believed this myth when I bought my home seven years ago. My buyer agent showed me a home listed by a different agency. Until I was gently corrected, I believed she could not "sell" it to me. It's not an uncommon belief. That's why I'm trying to debunk it.

Real estate myth 5

This is a continuation of a series of posts inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. Because I think an educated market benefits everyone, I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth #5: When I find a house I like, I'll just contact the agent selling it. I'll probably get a better deal anyway.

FACT: Remember that the seller has signed a listing contract with the listing agent. One of the things the contract stipulates is that the agent will be compensated for a percentage of the sales price to sell the home. There is no room for negotiating the listing agent’s compensation.

As a professional, the listing agent has a fiduciary responsibility to the seller. He is ethically and legally bound to do everything in the interests of the seller, not to the buyer. Consider using the services of a buyer's agent to represent your interests.

Real estate myth 4

This is a continuation of a feature inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. I think an educated market benefits everyone, so I intend to debunk as many myths as possible. I hope you find this information useful. Please feel free to comment!

Myth 4: It doesn't matter which agent you list your home with

FACT: Selecting the right agent is critical to marketing and selling your home. A successful agent must be proactive, educated, experienced, a skillful negotiator, be able to anticipate problems, and communicate regularly.

You want an agent who is willing to work hard for you and set your expectations from the first day. Your agent should be able to test the market and report the results so that you can make the necessary marketing adjustments to attract the right buyers. And your agent should demonstrate the ability to listen carefully as well as to communicate effectively.

You want an agent who treats you as more than his fiduciary responsibility. If you're lucky, you'll make a lifelong friend, but that isn't necessary. At the least, you want someone who takes a continued interest in your personal welfare.

Finally, you want an agent who is comfortable with Internet technology: over 80% of buyers today begin their search on the Internet.

Real estate myth 3

This is the continuation of a feature inspired by a conversation with an acquaintance who revealed a good deal of ignorance about the real estate profession. I think an educated market benefits everyone, so I intend to debunk as many myths as possible, one myth at a time. I hope you find this information useful. Please feel free to comment!

Myth #3 'Our New Kitchen Is a Great Investment'

When folks buy a house, they fret over how many bathrooms and bedrooms they are getting and what sort of remodeling might be needed. But these things won't determine the home's future appreciation.

Indeed, as time, weather and use take their toll, the house itself will tend to depreciate, necessitating costly repairs. Instead, over the long haul, what propels home prices higher is the value of the underlying land. A new home can always be built. But the land has scarcity value.

Which brings us to the subject of remodeling. To be sure, home improvements can add to your property's value. But they aren't a moneymaker.

For proof, consider the annual survey by Remodeling magazine. The 2000 survey found that you might recoup 60% of the cost of adding a sun room, 69% of the expense of refinishing your basement and 81% from a bathroom remodeling.

Numbers like these might sound encouraging. But think again. If you get back 81% of the money lavished on your bathroom, that means you have just lost 19%.

Moreover, Remodeling magazine's estimates are based on selling your home within a year. The longer you wait, the scruffier your home improvements will look and the less you will recoup.

That doesn't mean you shouldn't undertake home improvements. If you get a lot of pleasure from your remodeled bathroom, it is money well spent. But don't kid yourself. It's not an investment.

Thanks to Jonathan Clements of The Wall Street Journal

Real estate myths

I believe that an educated market benefits everyone. I had a conversation this week with an acquaintance who was clueless about the real estate profession. I have him in mind as I start this new feature. You might have heard (or even believe) these myths--they're often perpetuated at the neighborhood summer get-togethers.

I hope you find this information useful. Please feel free to comment!

Myth #1 'The bank owns most of my house'

"I hear that statement a lot, and it makes no sense," says Chris Mayer, a real-estate professor at the University of Pennsylvania's Wharton School. "Suppose you buy a house for $250,000 and you put $50,000 down. You might think that you own 20% and the bank owns 80%. But if the house's value goes down $50,000, you lose $50,000 and the bank loses nothing."

Fortunately, the leverage that comes with a big mortgage usually works to enrich homeowners. Consider that $250,000 house bought with $50,000 down. If the home's value climbs just 20%, to $300,000, the value of your equity would double to $100,000.

Still, because of the debt involved, purchasing a house is a risky proposition. To get a better handle on the investment bets you are making, it can be helpful to consider your house separately from your mortgage. If your home's current value is $250,000, that is your real-estate exposure.

Meanwhile, think of your mortgage as a bond, suggests William Reichenstein, an investments professor at Baylor University in Waco, Texas. But in this case, instead of buying bonds and receiving interest, you are effectively selling a bond and paying interest.

What are the implications? Suppose you are retired with, say, $300,000 in bonds and $200,000 in stocks. You might think your portfolio is conservatively positioned.

But if you still have $125,000 outstanding on your mortgage, you would need interest from roughly $125,000 of your bonds to pay your mortgage interest. The bottom line: Your net bond position is really just $175,000, and thus your portfolio has more in stocks than bonds.

Thanks to Jonathan Clements of The Wall Street Journal