Hello and welcome to this full-featured, tell-all piece that will expose you to the truth behind popular real estate myths. Many of these widely held beliefs seem, at first blush, like common sense but I will bust these myths and explain what’s really going on.
So hold on tight! These Top 10 Real Estate Myths aren’t going to go away quietly… things could get messy.
Myths of Real Estate Buying
I’ve divided the Top 10 real estate myths into two categories. The first group comes into play when buying a home. You may currently believe a few of these yourself.
1. Find the Perfect House First, Then Talk to the Lender
I put this one first because it’s a very big problem. It might just be the most common real estate myth of all! There are a number of reasons why it exists.
First, the fun part of buying a home is looking at the potential winners online, picking your favorites, and visiting them in person. We all do it! It’s almost a national pastime! The looking is so enjoyable that we forget the better path.
Secondly, buyers often underestimate the emotional appeal that comes when buying a home. You might fall in love with that great, renovated Cape Cod with the open-concept kitchen and living room, only to find out later that it’s nowhere close to being a home you can afford.
Getting pre-approved with a reputable lender is the smart first step. Then, and only then, is it safe to begin your house hunting in earnest. I promise this is the right way to go.
2. Agents Have to Show Me Any Home I Want
Like most working people, real estate agents don’t work for free. They don’t have to show you anything at all. Most want to show you properties, in the hopes that you will purchase a home, but not everyone looking is a serious buyer.
Some state regulations are such that the listing agent isn’t even required to show you their listing unless another Realtor makes the request.
In our day and age, we can’t always trust that someone is what they claim to be. There are many jobs where service is optional and entirely up to the judgment of the contractor.
It’s not uncommon for thieves to target high-end homes, so in these cases, the real estate agent is doing the homeowner a valuable service by not showing their home to a suspicious caller.
3. I’ll Get a Better Deal If I Work with the Listing Agent
This real estate myth can be a costly one. There’s a certain mindset that some might have that if they come to the listing agent without representation, they can negotiate a better deal for themselves.
Let me just say, this is a big mistake.
Between the two, which person has more negotiating experience when it comes to real estate transactions? That’s right, the listing agent. Who has greater knowledge about the true market value of the home? Yes, it’s the agent again.
It makes perfect sense that the homeowner wants as much as possible for their home, right? And the listing agent’s primary fiduciary responsibility is to their seller, not the buyer. So why would the listing agent push the homeowner to lower their sales price when that person is their client too? Answer: They won’t.
We haven’t even talked about the other parts of a real estate deal, like the home inspection, title search, date of possession, and other contact details. I’m not saying a buyer without an agent will never get a great deal. It’s possible but it’s a long shot.
And at the end of the day, would they know whether the price they paid was really a good price or not?
4. Agents Need to Tell Me About Crime, Schools & Ethnic Make-up of Neighborhoods
You would think an expert real estate agent would know all about the city he’s been living in his whole life. So, why would he not share this information with the client that he’s trying to serve?
It turns out the answer is, “It’s against the law.”
Federal Fair Housing laws are currently stated to prevent a real estate agent from disclosing anything that might reflect poorly on certain protected classes.
Real estate agents may recommend sources of information for the home buyers to use but they can not tell you which neighborhoods might have a larger Hispanic population or which schools get higher test scores.
5. Agents Can Only Show Me Their Own Listings
I’m not really sure where this myth came from. It makes sense that real estate agents would prefer their clients to buy their personal listings if there was a good match, but even the listing agent with the largest number of listings in a given market still only accounts for a small portion of the housing inventory.
Even if you increase the share to include all the listings for that agent’s company, there would still be thousands of additional properties that you, as a buyer, would want to consider.
This silly real estate myth needs to be put out of its misery.
Myths of Real Estate Selling
Now let’s head over to the selling side of things. These real estate myths aren’t any less troublesome though, so be warned.
6. Selling “For Sale By Owner” Will Save Me a Lot of Money
This real estate myth can be costly. Not just your money though, but your time as well!
The number of homes sold by owners has steadily decreased over the years. Back in 2003, about 14% of all sales were FSBO. This past year it’s 9%. The rationale makes sense, if I don’t have to pay those pesky Realtor’s commissions, I can save a lot of money. I mean, how hard can it be? Stick a sign in the yard and wait for the phone to ring, right?
Well, if you live on a busy street you might have a shot. But there’s far more to marketing a home for sale than a yard sign. These days it’s all about digital promotion. Then there’s the paperwork, negotiations, inspections, and the list goes on.
But let’s get back to those commissions. Even if you have the opportunity to save the listing agent’s commission by doing all this work yourself, most buyers come with their agents who’ll want to get paid for their work.
Now, do you have a solid grasp on the current market value of your home? I hope you’re not trusting Zillow for sales data. Surveys have shown their information to be only 79% accurate. What if you underprice your home? You could lose far more than that half portion of the agent’s commission.
What if you overprice it and it sits there for 6 months? What if you get your home under contract but mishandle a legal requirement during the financing phase? It’s been known to happen. This real estate myth is easily busted.
7. Staging My Home Isn’t Necessary
I find this myth hard to believe. But it exists… I’ve seen these homes in person!
Here’s the tip. Just because you like something, doesn’t mean that everyone else does. You see, we are all creatures of habit. We’re more comfortable in our surroundings and any problems with our house are easily ignored. Or, perhaps you just have a more pressing business? Life can certainly be hectic.
So when you see those homes on HGTV that are picture perfect and look like they belong in a magazine, you can bet that the buyers who are coming to your home have seen these shows too.
When your home doesn’t “measure up” you only have yourself to blame.
8. If I Reduce the Commission, I’ll Make More Money
This real estate myth might seem like it makes sense but here’s the problem. Reducing the percentage for the buyer’s agent introduces a disincentive to show your home.
By law everything is negotiable. In some cases, like a very rare but desirable property, a lower commission might not turn off a buyer’s agent from showing the home to their client. But most of the time, the most popular commission rate is the most popular commission rate for a reason, it’s market value for the work involved.
This is true on the listing side as well. The best agents won’t discount their rate because why should they? They’re the best!
So you’re left with only the desperate, hungry agents who will agree to a reduced commission. In the end, we all get what we pay for.
9. When Setting My Asking Price, I Should Always Leave Room For Negotiation
This might be the most common real estate myth of them all! It takes true savvy to know how to price a particular home. You need extensive knowledge of the current market, and what is selling quickly at each price point for every part of your city. It’s not easy but it’s incredibly important!
Elite real estate agents understand this. They can accurately identify true market value. Once that’s done, it’s been proven that pricing the home competitively from the start is the best way to get top dollar.
This is true because your listing will always get the greatest exposure when it first hits the market. Therefore, a competitively priced home in a seller’s market can often attract multiple offers. Cha-ching! Then, your only hurdle is passing appraisal.
Overpricing a home from the start is the surest way to have your house sit and sit and sit some more. The home will eventually need to be reduced in order to sell, why not price it right from the start?
10. Open Houses Are the Best Way to Sell Houses
What once was true is now ancient history. Not only is it now rare for a home to sell due to an open house, it’s also often for the wrong reason. The National Association of Realtors estimates that only 2% of homes are sold due to open houses.
In today’s society, we’re all moving at a hectic pace. Time is valuable. The internet lets us view listings at the best time for our schedules. Then we also schedule our showings the same way.
Waiting until Sunday is no longer the norm. The open house has now become a tool that listing agents use to try and get more real estate clients for themselves.
Don’t forget, most buyers prefer to preview a property in private without a listing agent walking around promoting everything in sight.
Myths of the Real Estate Industry
Here I’ve collected five bonus myths of the real estate industry. See if any of these are the ones you believe.
Bonus #1: All Real Estate Agents Make a Lot of Money
It makes sense for people who have bought homes to see the commission amount on their closing statement. What they don’t know is that this amount goes to the broker. The broker splits it with the agent according to their agreement. Then, the agent needs to take taxes, insurance, supplies, marketing, and other variable costs of it.
What remains is their profit. And that number is under $40,000 nationally.
Bonus #2: Home Inspectors Always Favor the Realtor
Inspectors can be recommended by your real estate agent but they work for you. You are their client. To help you believe that you’ve chosen wisely, they’re going to do everything in their power to find as many problems in a prospective home as possible.
The other side of the coin is that some home inspectors will try and sugarcoat a problem that might be a serious issue. The reason they might try this is because they do not want the deal to die and potentially hurt their standing with the agent. Trustworthy Realtors won’t let this happen but not everyone in the business looks out for their client’s interest first.
With that said, home inspectors want a positive reputation in the market as well. A great rule of thumb is to work with professionals who aren’t new to their occupations. These are people who might make a novice mistake or compromise their principles to make a sale.
Bonus #3: Agents Will Say Anything Just to Make the Sale
This real estate myth might fall under the category of “one bad apple spoils the whole bunch.” Do people still say that?
Listen, I’ve been in this industry for more than a decade. I’ve worked with other agents, loan specialists, home improvement contractors, and even lawyers. (Yes, I listed lawyers last.) But throughout my experience the vast majority of real estate professionals are honest, hard-working people, looking to do a good job.
Of course, every occupation has its share of rats. The barrier to entry for real estate agents isn’t very large. So perhaps we might have a larger share than most, but for every sleazy salesperson who calls themselves a Realtor, I could find you 50 who are honest and want to serve you to the best of their abilities.
Select a full-time agent who isn’t just starting out and understand that long-term success is the #1 priority for most Realtors.
Bonus #4: Agents Get Kickbacks from Inspectors, Lenders, Etc.
Since the Real Estate Settlement Procedures Act (RESPA) became law in 1974, getting a kickback from a service provider became illegal. This is definitely a real estate myth busted.
Some agents may try to skirt the law but the penalties are not worth the benefits; not by a long shot. Losing their license would destroy years of work, not to mention harming their personal reputation.
Bonus #5: All Realtors Are Pretty Much the Same
I saved this myth for last. Honestly, I’m not sure it holds much weight these days. It’s 2015! We’re all quite good at evaluating products and services, don’t you think? Why should real estate agents be any different?
There are outstanding agents! There are horrible agents! There are agents that quickly respond when you text them. There are also agents that couldn’t send you a text if their life depended on it.
Some agents focus on listing homes. Others prefer to help buyers.
We have agents who like to flip houses, while others prefer to manage rental properties.
Real estate agents are as varied as you will find in any occupation. Some like to have their faces splashed across billboards across the city. Others would be horrified that you even suggested it!
What it boils down to is what you need for your situation. Make a few calls. Ask lots of questions. In the end, just make sure you select a trustworthy Realtor that has your best interest at heart.