Just because you read something on the internet does not mean it is true. The same can be said about something you may hear a co-worker or family member conversing about.
Real estate myths are all too common, however, they can be “debunked” with a proper explanation. I know you’re asking yourself, what myths could possibly exist in real estate?
Here are the 10 real estate myths, in no specific order, that are commonly heard and misconstrued by the general population.
All Real Estate Agents Are The Same
One of the most common real estate myths is that all real estate agents are the same. This myth can lead to buyers and sellers making big mistakes when selecting a real estate agent to represent their interests. Every agent has different skills, different experience levels, and different traits.
Two agents within the same company will have entirely different marketing plans for selling houses they list. For example, I have been in the business since 1990, and I have a 74 point marketing system for my listings; The traditional real estate sales person follows the "3 P's Marketing Plan"... Put a sign in the yard... Put the house in the MLS... Pray it sells before the sellers notice that nothing is going on.
For example, a real estate agent who has been selling real estate for two years and primarily works as a buyers agent is not going to have the same skill set as a real estate agent who has 20 years of experience.
There is a significant difference between real estate agents who work with sellers and real estate agents who work with buyers. The saying, “All men are created equal,” is the complete opposite when it comes to real estate agents.
All Real Estate Agents Make Boatloads of Money
Successful real estate agents certainly can make a very nice income. The amount of time, effort, and money that top producing real estate agents need to put forth is significant. A common real estate myth is that all real estate agents make boatloads of money.
No, The Million Dollar Club designation does not mean that agent makes $1Million a year in income. It means the agent has sold at least $1Million worth of property. Heck, here in Virginia, an agent sells 3 houses priced $375,000 in a year is a $Million Dollar Club member.
The general consensus is that real estate agents earn 6% of the sale price of a home, no matter what. This is not true. There are many things that effect the percentage of commission earned by real estate agents. First and foremost is the fact that commission is negotiable. Any real estate agent who says otherwise is likely violating rules and regulations.
Let’s assume that a seller is willing to pay 6% of the sale price of their home. The 6% commission is normally divided between the listing and selling brokers. The real estate brokers then take a “cut” of their respective commissions before distributing to the real estate agents involved in the transaction. In addition to their company taking their “cut,” there are many expenses that real estate agents incur that most don’t realize. When an agent spends $1,800 marketing your house with professional photographs, exclusive websites, and print advertising, that money comes 100% out of the agent's pocket... not from the company.
Then there Items such as health insurance, fuel, car maintenance, and self employment taxes are just a handful of the expenses that real estate professionals are responsible for. Next come fees to be a member of the National Association Of Realtors, fees to the Virginia Association Of Realtors, fees to the Northern Virginia Association Of Realtors that add up to over $2,000 per year. Plus, over $700 per year to have access to the MLS.
Obtaining a real estate license is not difficult. Many people get their license thinking it’s an easy way to make boatloads of money. There are many considerations that should be made before getting a real estate license. Industry statistics show that 90%+ of newly licensed sales persons drop out of the business within 2 years.
The typical real estate sales person sells just over 4 houses per year. My team has sold over 2,000 homes over the past 24 years. Pretend you're a police officer about to get into a shoot-out with bad guys. Do you want a partner who has experienced four shoot-outs, or a partner who has survived hundreds of shoot-outs? Or imagine you are having heart surgery. Do you want a surgeon who has done 4 heart surgeries or a surgeon who has performed 100's of heart surgeries?
When Selling a Home, Price It To Leave Room For Negotiations
Correctly pricing a home is one of the top 3 important things when selling a home. Incorrectly pricing a home can be the “kiss of death.” There are several real estate pricing mistakes that sellers commonly make. One of these common pricing mistakes also happens to be a very common real estate myth as well.
Pricing a home higher so that there is room for negotiations with a potential buyer. This real estate myth, if believed by a seller, can lead to tons of frustration and potentially to a home that sits on the market for a long time. If you are selling your home, you need to understand who today’s buyers are and what they are all about. The internet has greatly impacted the real estate industry. Buyers are more savvy and educated than ever before, due to the amount of information available through the internet.
Buyer Agents show buyers the comparable sales (comps) in the neighborhoods where they want to live, so that the buyer knows they can afford to live there. Buyers compare list prices to sold prices. When they see your house priced significantly higher than the comps, they pass you by because they believe you will be too much hassle to do business with.
A buyer will not waste their time looking at a home that is overpriced by thousands of dollars. So before you list your home $25,000 higher than a top producing real estate agent suggests to leave room for “negotiating,” you need to understand that most buyers will know it’s over priced and may pass on looking at your home.
You Get A Better Deal When Buying a Home Through The Listing Agent
Buying a home can be a complicated process, especially for a first time home buyer. It’s imperative that when buying a home, you have a great real estate agent representing your best interests. A common real estate myth is that when buying a home, using the listing agent will result in a better deal on the home. The thought process behind this myth is the listing agent will cut their commission percentage because they are receiving both “sides” of the transaction.
If you use a listing agent to buy a home, consider how hard the listing agent is going to negotiate the price with the seller, who also happens to be their client. Same goes for any negotiations from the home inspection findings. It’s possible by using the listing agent a better deal could be had, however, the biggest consideration that needs to be taken into account is the representation that will be received.
Getting Pre-Approved Is Done After Finding Your Perfect Home
Many home buyers believe that getting pre-approved doesn’t need to take place until they have found their perfect home. This is a huge mistake for many reasons.
When you go to a store, do you check your wallet on your way inside to be sure you have enough money to make your purchase? It works the same way with a house.
There is nothing sadder than a buyer finding their dream home, then finding out they cannot qualify for financing to buy the house.
A buyer should be and want to be pre-approved for a mortgage before they house hunt. House hunting can be time consuming, exciting, an adventure, and many other things. Before getting involved in a full out search for that perfect home, eliminate the chances of any disappointment down the road by getting a pre-approval from a mortgage lender. A buyer can be devastated if they find a home they love, write an offer, and have it accepted only to find out in the future they have been declined for a mortgage.
Another reasons why a buyer should get pre-approved for a mortgage before finding their perfect home is in the event their perfect home is receiving multiple offers. A multiple offer scenario is a dream for a seller and a nightmare for a buyer. A buyer who has been pre-approved has a significant advantage in a multiple offer scenario.
Open Houses Sell Houses
Many sellers love the idea of their home being open every Sunday. A common real estate myth is that an open house is a great way to sell a home. The fact is that according to the National Association of Realtors, less than 1% of homes are sold as a result of an open house. Can a sale result from an open house, YES. Is it likely, NO.
You’re probably asking yourself why many real estate agents push open houses. When interviewing potential Realtors to sell your home, ask them why they want to hold your home open every Sunday. If the answer is because it will sell your home, you may want to reconsider hiring that prospective Realtor.
The primary reason why a real estate agent would swear by open houses is because they see them as an opportunity to pick up new clients. It’s possible that a buyer walks through an open house and does not have a real estate agent they’re working with. This is a great opportunity for the real estate agent to convert the potential buyer into a client.
Before deciding whether an open house is something you would want to take part in when selling your home, consider all the possible drawbacks of an open house.
Selling A Home “For Sale By Owner” Saves Lots of Money
The main reason sellers believe that selling their home “for sale by owner” (FSBO) is a good idea is because it will save them lots of money. This is a common real estate myth. Many sellers who attempt to sell their home FSBO believe that selling homes is easy. It would be great if selling homes was as simple as putting a for-sale sign in the front yard of a home, input the home into the MLS, and watch it sell, but it is not.
FSBO’s often will end up losing money by not hiring a professional real estate agent. This could be due to several different reasons. Did the FSBO overprice their home and it didn’t sell for 6 months? Was the transaction mishandled ending up in a buyer being declined after 3 months under contract? Did the FSBO not know how to negotiate the best price and terms for their home? FSBO's often give up critical negotiation points to prospective buyers because they don't know when to keep their houth shut; Anything you say can, and will be used against you in negotions.
My team just finished selling a house that was For Sale By Owner, FSBO (fizz'-bo). Mr. Seller had to jump through hoops to do the listing agent's job, causing him to take valuable vacation days from work to file the proper disclosures, and supervise home inspection repairs. We could not tell him what to do or when to do it because we had a contractural agreement to protect the buyer's interests, not the sellers.
Real Estate Agents Only Can Show Their Own Companies Listings
Real estate agents who belong to their local real estate board and MLS have access to any listing that is multiple listed. A common real estate myth is that real estate agents can only show their own listings or their own companies listings. This is false.
For example, if a real estate agent works for my firm, Exit Realty Associates, they also can show properties that are currently listed by other real estate companies, such as Re/Max or Long & Foster Real Estate.
Real Estate Agents Say And Do Anything To Make A Sale
Real estate agents are held to a very strict code of ethics and also many rules and regulations. Many believe, however, that real estate agents will say and do anything to make a sale, because they don’t get paid until a home closes. This real estate myth can certainly be possible as there are real estate professionals who will say and do anything to make a sale, however, the majority of real estate agents will not.
Most real estate agents business relies heavily on referral business, word of mouth business, and repeat business. A real estate agent who blatantly lies to clients just to make a sale, is unlikely to receive any of the above mentioned business. When buying or selling a home, it’s extremely important to select a very trustworthy real estate agent who you can trust and are comfortable with.
A Home Doesn’t Need To Be Prepared For Sale
The real estate myth that homes don’t need to be prepared for a sale can cost a seller thousands of dollars. Properly preparing a home for sale can be the difference between it selling in a relatively quick amount of time or it sitting on the market and developing a negative stigma. It’s very important that you don’t list your home before it’s ready.
Why is it important to prepare a home for sale? First and foremost, today’s buyers are more often than not looking for a home that is move-in condition. Additionally, the first 3-4 weeks on the market are the most critical. If a home is priced properly, prepared properly, and marketed correctly, it should be under contract in the 3-4 weeks on the market. Simple preparations, such as staging tips, general cleaning, minor improvements, and pre-listing inspections can all help minimize time on market while maximizing the sale price.
You can find out how to overcome these myths by calling or texting Erick Blackwelder at 703-677-1120. Or you may start an email conversation with Erick at his website.
You can rely on Erick's 25 years in the real estate business to help you get the best deal possible, no matter whether you are selling buy buying a house. Call or text Erick now at 703-677-1120.
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