If you’re in the market to buy or sell a home in Arizona, there’s a ton of information on the internet. But, how much of it is good advice, and how much is myth?
The following are some common real estate myths…debunked!
Myth: Searching for Homes is the Best First Step
You’re excited to begin the home buying process and can’t wait to start looking at homes. But you need to get your ducks in a row first. Assuming that you’ll be financing your purchase, the first step is to get prequalified with a reputable lender. There’s no use looking at a house listed for $600,000 if you only qualify for a $400,000 loan. Getting prequalified will help you focus your search within the price range that you qualify for, and feel comfortable with.
Myth: You Don’t Need a Real Estate Agent to Buy a Home
It’s true that sites like Zillow & Trulia have made it easy for buyers by providing information at their fingertips. However, don’t underestimate the value an experienced agent can bring. Buyer’s agents have a duty to protect your best interests. They provide knowledge about current market conditions and use their expertise to negotiate the best deal for you. And all this comes to you at no charge as the buyer agent’s commission is paid by the seller.
Myth: All Real Estate Agents are the Same
Although the general process of buying and selling is similar, no two agents are the same. Nor is their approach to real estate. As in every other profession, there are those who are committed to excellence, devote endless amounts of time and energy into working with their clients and are highly adept problem solvers. Others march to lower standards and do the bare minimum to get by. It’s best to do your research. Choose an agent with the expertise and professionalism to provide you with the best experience.
Myth: You’ll Get a Better Deal if You Buy a Home Through the Listing Agent
Buying a home is a complicated process to say the least. It’s imperative that you work with an agent who is representing your best interests. A common myth is that if the listing agent is representing both the buyer and the seller, that the agent will cut their commission percentage because they are receiving both “sides” of the transaction. However, as stated above, the seller pays the agent’s commission so the seller is the only one who may benefit from this arrangement. Remember, the listing agent still represents the seller and although they do need to be honest, fair and ethical to all parties, as the buyer, you’ll receive better representation by using an agent who is dedicated to your best interests exclusively.
Myth: Getting Preapproved Will Hurt Your Credit
The truth is that getting prequalified is only a “soft hit” on your credit, causing absolutely no impact. Once you apply for preapproval of a mortgage, it shows as a hard pull, which does slightly impact your credit score. Credit scoring models take into account that you might be shopping around for a home. If you initiate several mortgage applications within a short amount of time, they will likely be considered as a single hard credit inquiry. Hard credit inquiries will drop your score from one to five points. By initiating all of those preapprovals within a two-week window, you can limit the impact on your score.
Myth: You’ll Need a 20% Down Payment
Having the spare capital to put 20% down on a home purchase is great, but it’s really not the norm. There are many loan programs such FHA mortgages where you only need as little as 3.5% down and some of the closing costs can be covered as well. A reputable lender can advise you on what loan programs you qualify for.
Myth: A Down Payment is the Only Upfront Cost
Many uninformed buyers experience sticker shock when they head to the escrow company to sign their final papers. Your down payment doesn’t cover all your closing costs, which can include the cost of inspections and the appraisal, title insurance, escrow fees, reconveyance fees, notary fees, recording fees, upfront homeowner’s insurance, upfront HOA fees, etc. Your real estate agent can provide you with a closing cost estimate so that you can be prepared.
Myth: You Should Never Offer Full Price
These days low-ball offers on a home don’t fly. When housing inventory is low and demand is high, you need to come in with a respectable, competitive offer. Low offers can be insulting to sellers and generally aren’t a good way to open a negotiation. If you really want the home and it’s priced reasonably, offer close-to or at list price because chances are, another buyer might come along and outbid you. This is where a great agent can help you come up with a winning offer strategy.
Myth: Schools Don’t Matter if You Don’t Have Kids
The fact is that homes in the best school districts can cost significantly more than those in school districts where test scores are average or worse. It can be tempting to get more house for your money in areas with average educational standards because the fact that you don’t have kids means you’re not concerned about that. However, you should really consider playing the long game. When it comes time to resell your home, you’ll likely find that if it’s located in a better school district, it will have held it’s value better and will give you more return on your investment. If it’s within your budget, think about buying a home in a good school district.
Myth: Set the List Price Above Comparables to Build in Bargaining Room
Listing a home at a higher price than what comparable reports show may seem like a good idea to make sure your home sells for all its worth. The truth is that this is factually wrong. Asking a higher price than the comparables in your area is more likely to cause the home to stay on the market longer, generate less activity and ultimately sell for less that the market. Your agent will run comparables and suggest a list price that will interest buyers and provide you with the best price possible.
Myth: The Highest Price is Always the Best Offer
This is a common belief. However, the highest offers are not necessarily the best ones. You need to consider not only the price, but the terms as well. The buyer may want you to close escrow and vacate the home sooner than you wanted causing you to have to rent storage and incur other expenses that might make the offer not worth it. They may want the refrigerator and washer/dryer to be included in the sale when you had planned on taking those with you. Carefully go over the terms of each offer with your agent to determine if the highest offer is really the best one.
Myth: Save Money by Marketing Your Home as a “For Sale by Owner”
Many sellers attempt to go it alone to save on commission costs instead of hiring an agent, only to find out it’s not as easy as sticking a For Sale sign in their front yard and snapping a few photos of the home. In reality, FSBO’s run the risk of losing money. You may price your home too high and run the risk of it taking months to get an offer. On the flip side, you might price it too low leaving money on the table. In addition to price, an experienced agent can help you negotiate favorable terms. Selling a home is a big undertaking. You might just find that the time and stress it takes is just not worth it.
Myth: You’ll Recoup Remodeling and Home Improvement Costs When You Sell
The fact is that although remodeling and home improvements will certainly make your home more marketable, don’t expect to see a 100% return on your investment. Most sources estimate that the return rate averages 64% of your initial outlay.* Do your research. Make sure that the upgrades you’re making will give you the best rate of return.
The Truth of the Matter
Don’t let conflicting information or misinformation lead you astray in your home search or sale. It always pays to go straight to the expert source, your trusted agent.
Contact the Donnelly Group
If you are considering buying or selling a home in metro Phoenix, the Donnelly Group has the market experience to help you debunk these common real estate myths, and more! Please reach out, we are happy to help! Contact our team at 480-792-9700 or by email.