Busting the Top 5 Real Estate Myths

Here are the top 5 misconceptions I hear from clients as I work with them to buy or sell a home!

Photo byCaitlin McKeague

There are numerous real estate misconceptions, and I come across many of them while working with clients. Here, I'll address the top five misconceptions that arise most frequently, and number five might just surprise you.

Firstly, let's talk about money when you're buying a house. Many people think your down payment is the only thing you have to come out of pocket with to buy a house, and while yes, that is the biggest chunk, you're also going to have to come out of pocket with money for closing costs. These can be up to 2 to 3% of the purchase price, so you want to budget that in addition to your down payment. Additionally, there are a few more pesky costs, such as paying for your inspection and appraisal, which could be another $1,500 out of pocket.

While on the topic of down payments, here's a bonus misconception: you don't need 20% down to buy a house. There's a variety of loan programs out there, some that allow you to put down as little as 3%. Keep in mind that your monthly payment will be higher with less money down, and if you put less than 20% down, you'll have something called PMI, which is an additional amount on your mortgage payment. So, there are pros and cons to both, making it important to work with a lender who is helpful in educating you on this. By the way, if you're a first-time home buyer, make sure to check the description below for our first-time home buyer resources.

The next misconception I often discuss, specifically with my seller clients, is renovating your home before you sell. Many people believe this will increase your home value and allow you to get a higher price for your house, but it depends on what you're renovating. Most of the time, you're not getting a dollar-for-dollar back. For example, if you want to put all new flooring throughout your house and spend $20,000 doing that, you're not going to be able to list your home for $220,000 higher than you would have without the floors. It really depends on the projects you're looking to do before you list the house. If you have a house that is a complete disaster, maybe it's an investment property that just needs a full redo, that's another story. In that case, you really have two options: either fix it up or sell it as-is. Most of the time, depending on the market, I'm going to tell you to sell it as-is. Here's a quick story: I had a client with a complete fixer-upper home, and they were going back and forth between completely renovating it and then selling it or just trying to sell as-is, hoping they got a great investor who could fix it up. Looking at the numbers, the cost it would take to renovate the property and do it the right way, and then get it listed for sale, their profit margin was pretty slim. Of course, selling it as-is came at a lower price, but they didn't have to put much of an investment into it. Well, they decided to sell as-is, and we ended up getting a higher price than they expected. Someone purchased it, wanted to flip it and resell it, but they ended up having trouble reselling the renovated property. In this instance, it just made more sense to sell as-is. So, it's really a case-by-case basis, but don't think you'll get a dollar-for-dollar back just because you renovated the home before listing it for sale.

Moving on, I hear this misconception all the time: 'We sold our house' or 'The house is sold.' But really, it's just under contract, and there's a big difference. Just because you're under contract, the process is far from over. As a matter of fact, it's just getting started. It usually takes about 30 days to go through inspection and appraisal, and during that time, buyers can cancel, or the price could even change. The negotiations continue during that timeframe, especially after the inspection, where buyers can negotiate a concession or a purchase price reduction in lieu of repairs that are needed for the house. So really, nothing is set in stone once it's under contract, including the offer price. Just keep that in mind if you're a buyer or a seller that gets an offer on your property that you've accepted. You still have a ways to go before the house is actually sold.

If you're on the sidelines and looking at homes listed on Zillow or any other sites out there, and they say 'pending' or 'under contract,' it's important to remember that it doesn't mean the deal is done. Furthermore, it doesn't mean that's the price the house is going to sell for. The actual under-contract price is not shared on the MLS or any other sites. So, unless the agent is willing to disclose that to you, we don't usually know what the house is actually under contract for. Once the sale actually closes, that closing price is public. Keep that in mind as you're looking at homes that show under contract. Not only could that price be incorrect, but you might have another opportunity to swoop in and grab it if the deal falls out.

I can't tell you how many times I hear this: 'You're better off buying a new home than an old home.' I'm not going to say this is wrong, but I've seen enough evidence to support the fact that buying new is not always a better option. New homes are great, but they're not always built as well as old homes. It really depends on the builder, but often things can be overlooked. For example, I've seen builders completely forget to insulate the entire attic space, and that's a big deal in Arizona in the summer. I'm sure you've heard horror stories on the news of home buyers who are really unhappy with their new build, and builders aren't coming back to fix quality issues that have come up. There are plenty of issues that you can have with a new construction home, so it's not black and white that it is better than an old home by any means. Older homes actually have a lot going for them, especially if they've been well-maintained. Often times, they're in better condition than a new build that was thrown together. The bones are good, the foundation has settled, and there shouldn't be a lot of surprises if they've been well-maintained over the years.

Now, here's the biggest misconception that I hear from my clients: 'A bedroom has to have a closet, or it's not a bedroom.' As a matter of fact, the MLS rules actually state that there is no definition of what a bedroom has to have to be considered a bedroom. What I've been told through the years is it has to have a door and a window. But as I dug into more building standards, there are some specifics about the ceiling height, the size of the room. Obviously, you can't have a tiny room with a low ceiling, and just because it has a door and a window, it's called a bedroom. That one always blows everyone's mind, and it can be a little bit misleading when you're looking at a property that says it's four bedrooms, and you get there and realize that one of the bedrooms doesn't have a closet. Often times, a den is also considered a bedroom because you could use it as a bedroom and just bring in a wardrobe. So, as you're out there home searching, don't be surprised if you show up to a house and one of the bedrooms doesn't have a closet. It's still technically allowed to be a bedroom.