Buying and selling a house is something most people do pretty rarely, but thanks to the internet and opinions from well-meaning friends, family and strangers…everyone has some ideas and opinions to share about real estate. Unfortunately, a lot of those ideas are, well… wrong. Here are five real estate myths that trip up buyers and sellers.
Real estate myth #1: When pricing your home for the market, leave room for negotiations
One of the most important things you can do when listing your house is correctly price it. Don’t worry about leaving “wiggle room” for negotiations. If you price it too high, people won’t waste their time even looking at it, and your house will likely sit there on the market for a long time…long enough that even when you do drop the price a couple weeks later, people will look at it and assume something must be wrong with it.
Real estate myth #2: Selling A Home “For Sale By Owner” will save Lots of Money
The main reason sellers think selling their home “for sale by owner” (or FSBO) is a good idea is because it will save them money. These same sellers usually assume that selling homes is easy – it’s just putting a sign up and posting the house online, right? FSBO’s often lose money by not hiring a real estate agent. It could be overpricing the home so it sat there for eight months or the seller might not know the best ways to negotiate the best price and terms. You’ll also find that buyers expect a substantial discount when you go for-sale-by-owner… so what you save on a real estate commission may end up meaning a lower price. It’s not impossible to sell on your own for the same price as you would with an agent, but it’s not easy.
Real estate myth #3: Sellers will earn back everything they invested in remodeling projects when it comes time to resale
It’s nearly impossible to get 100% of the money put into a remodel. Remodeled kitchens and bathrooms are huge selling points to prospective buyers…and if you fix the air conditioning, sprinkler system or roof, you will sell your house a lot quicker, but you probably won’t recoup everything that you spent.
Real estate myth #4: Your down payment must be 20%
Yes, a 20% down payment is definitely ideal to avoid having to pay private mortgage insurance (PMI). However, many lenders offer home loans with as little as 3.5-5% down. Plus, there are SO many options for down payment assistance. A lot of the programs are geared toward lower-income home buyers, but you don’t have to be destitute. Reach out to me if you need help getting in contact with a great lender to go over your options – I know several!
Real estate myth #5: The only up-front cost as a buyer is a down payment
Unfortunately… not quite. If you’re a buyer, closing costs will run anywhere from 1 to 3% of the purchase price. There are also a handful of fees, taxes, and other costs, like for inspections, credit reports and insurance. Your lender will give you a loan estimate for your loan shortly after you submit the application and this estimate will include about what the closing costs on your home will be. Sellers in Washington can expect to pay about 9% of the purchase price in closing costs, which includes title insurance, escrow, commissions, taxes…you know, all that fun stuff.