Real estate is a dynamic industry that has always attracted aspiring investors looking for the perfect deal. However, the internet is full of bad advice and myths that could get you started in the wrong direction.
There are many myths surrounding real estate that could derail your entire journey. This blog will explore the most common real estate myths and why they are untrue. It will also discuss why it is essential to be aware of these misconceptions and how they can harm your chances of success in the industry. If you want to get started on the right foot in real estate, read on to find out more.
Myth #1. You will save money without an agent
One of the most common real estate myths is that selling your home without an agent — known as for sale by owner or FSBO — saves you money. The truth is, hiring an agent is more beneficial and cost-effective in the long run.
For one, agents can bring a wide range of buyers to consider your home, which might not be possible when selling solo. Practicing professionals have a wealth of information about local market trends, pricing, and legal requirements that can help you make informed decisions. An agent also has access to a network of real estate professionals and resources, such as home inspectors, mortgage lenders, and contractors.
The same goes when buying a home as well. A qualified agent can guide you through the entire home selection process, from finding the right neighborhood to avoiding potential pitfalls at closing. They also have experience negotiating to ensure you get the best deal possible. Working with an agent helps make sure that all potential issues are handled professionally during the transaction, saving you time and stress.
Myth #2. Getting preapproved will hurt your credit
One of the most harmful misconceptions among real estate buyers is that obtaining a mortgage preapproval will harm their credit score. However, getting preapproved for a loan does not affect your credit rating. Lenders only use a soft credit check to prequalify applicants, which has no impact on your credit score. A hard credit inquiry is only performed when you submit a loan application. This is the only time it will affect your score.
Getting preapproved indicates to sellers that you are serious about purchasing a property, which can give you an advantage over other prospective buyers. A preapproval also lets you know precisely how much you can afford to borrow, which helps when searching for the ideal property. Finally, preapprovals do not obligate you to borrow the total amount you are approved for. Instead, they give you an upper limit to help guide your home search.
Myth #3. You need a 20% down payment
It is a common misconception that home buyers need a 20% down payment and enough money to cover all closing costs. For example, if a home is worth $300,000, a 20% down payment would be $60,000. However, there are several loan programs available with lower down-payment requirements. These include loans with as low as 3% or even 0% down.
Research different loan programs available to you to find the one that suits your needs. Some lenders offer no closing cost loans or grants to help offset fees. In certain situations, the seller may also pay part or all of the closing costs, depending on your negotiated terms. Shopping around and comparing loan types is essential to find the best fit for your financial situation.
Myth #4. A down payment is the only upfront cost
A down payment is not the only upfront cost associated with buying a property. However, this is still a common misconception among homebuyers. While the down payment is a significant expense, other fees are also involved, such as closing costs, appraisal fees, and inspection fees. The good news is that first-time homebuyer grants and other assistance programs are often available to help offset some of these costs.
The down payment amount varies depending on the type of mortgage acquired, and typical amounts range from 3.5% to 20%. For buyers who put down less than 20%, private mortgage insurance (PMI) may be required to protect the lender in case of default. It is highly recommended you consult with a mortgage officer to explore loan options, determine which loans require PMI, and how much down payment is necessary. It is also essential to have an emergency fund in case of unexpected costs that may arise.
Myth #5. Schools do not matter unless you have kids
One common expectation for buyers without children is that they do not need to consider the schools in an area. However, good schools should always be considered when searching for a house, regardless of whether you have or plan to have children.
Most buyers view good school districts as valuable even if they do not have school-aged kids. Good schools can help attract employers and bring economic benefits to the area. Furthermore, investing in a home in a good school district can improve the property's resale value in the future. Lastly, good schools have a lasting positive impact on the community, helping to create a vibrant and healthy neighborhood.
Myth #6. Home inspections are unnecessary
Skipping a home inspection to save a few bucks can lead to costly and sometimes dangerous issues in the long run. This is why many buyers include an inspection in the purchase contract to protect themselves from unforeseen problems.
Inspectors can identify potential problems such as black mold, electrical issues, or other structural defects that are not immediately visible to an untrained eye. With modern technology, they can even examine new-built construction for indications of moisture in walls and ceilings to see if the home has been properly sealed against the environment.
Even when not required by a lender or insurer, home inspections provide both buyer and seller peace of mind. They can also help address safety hazards before moving into a property. Beyond that, a qualified inspector can advise you on how to best maintain a property over time.
Myth #7. You can negotiate any price
One of the most pervasive real estate myths is the idea that the negotiated selling price is all about negotiating tactics. A successful offer on a home needs to be based on more than just the price the buyer wants to pay. While negotiations play a crucial role in real estate, their success depends on various factors such as budget, the asking price, the home's condition, and other relevant factors.
Seller concessions such as covering specific fees or flat percentages are also open to negotiation. The buyer may also be able to request a rebate of some of the buyer agent's commission. Finally, it is essential to recognize when a negotiation is not in your best interest and when to finalize the deal.
Myth #8. Home staging does not matter
Appropriately staging a home can play a critical role in increasing the selling power and appeal of the property. A professionally staged home can help potential buyers envision how they can use the different rooms and live in the space.
Home staging aims to make spaces more attractive and inviting to potential buyers by highlighting the home's best attributes. If you are unsure where to start, do not worry. Your agent can guide how to stage your home effectively. They can also make it easier to find a professional staging service and help you understand what buyers are looking for in a home.
Myth #9. You need to be a real estate expert
One of the most common myths in real estate is that you need to be an expert to invest. While it is true that you need to have a basic understanding of real estate investment strategies, you do not have to be an expert to buy real estate. The key to successful real estate investing is to work with a professional with the right expertise, such as The Crouch Team. With the correct guidance and knowledge, anyone can invest in real estate and reap the benefits.