Real estate may be the only investment you can live in, but this familiarity hasn’t stopped several real estate myths from taking root. Buying or selling a home is an uncommon event for most people, and because of that, it’s not fair to expect everyone to be a real estate expert. To help you prepare for your next home purchase or sale, here is the truth behind five real estate myths.
1. You can look up a home’s exact value online
Several popular real estate websites appear to publish precise home values for just about every address in the country. Read the fine print, however, and you’ll learn that these figures are just rough estimates based on public information fed through computer formulas. These numbers may be okay for getting a ballpark idea of the values of most homes, but for a more reliable estimate, you should consult a local expert like a real estate agent or home appraiser. These professionals will examine the home in person and compare it to the recent sale prices of similar homes in the area to produce a more precise estimate of the home’s value.
2. There’s no need to get a home inspection when buying a home
At a typical cost of $200 to $500, it may be tempting to skip the optional home inspection step when buying a home. Some homebuyers even believe that a home appraisal covers the same points as an inspection (it doesn’t). Getting a home inspection is highly recommended because it helps protect you and your new investment. A home inspector will examine the home from top to bottom to look for issues that might cost you money, put your safety at risk or expose you to legal liability in the future. If any negative items are discovered, you may be able to ask the seller to fix them, request a credit on the sale price or back out of your purchase entirely.
3. Your only upfront homebuying cost is the down payment
With mortgage down payment options as low as 3% or even 0% for qualified homebuyers, purchasing a home today can be very affordable. However, your down payment is unlikely to be your only upfront homebuying expense. Closing costs – the fees and taxes related to your purchase – can range from 2% to 5% of your loan amount (for example, $4,000 to $10,000 on a $200,000 loan). Thankfully, you may be able to negotiate to have the seller pay some or all your closing costs, and special mortgage programs with down payment assistance may also be available. Ask your real estate agent and your loan officer about your options.
4. You should always bid low when buying and price high when selling
Most home prices are negotiable, so it makes sense to try to get the best deal you can. Therefore, it’s easy to assume that you should always start with a lowball offer when buying a home and always ask for more than you expect to get when selling a home. Sometimes, however, the opposite strategies are best. If you’re trying to buy a home that’s already priced fairly in a competitive market, you might need to make an offer near or even above asking price to get the home. When selling your place, setting a lower price usually results in a quicker sale – and it may be a way to get multiple buyers to bid against each other and drive up the price. Your real estate agent can advise you on which approach they recommend for your situation.
5. The first step of buying a home is looking at homes
You wouldn’t go grocery shopping without your wallet, and you shouldn’t go home shopping without home financing. Your first step when buying a home should be to get preapproved for a mortgage and a specific loan amount. Your preapproval will help set your homebuying budget, show home sellers that you’re a serious buyer and eliminate extra steps, paperwork and stress once you’ve found a home to buy. Working with your loan officer to get “mortgage-ready” early may even save you money by getting you into a better loan program.
Buying or selling a home is often an exciting time, an important life event and a major financial transaction. By learning the truth behind myths like these before you get started, you’ll have an added edge in your home purchase or sale.