Myths About Real estate

Myths About Real Estate

Myth #1: I can save thousands of dollars by selling my home myself (FSBO) and cutting out the agent.

FACT: The majority of "For Sale By Owners" eventually list with a real estate agent. Why? Because the owners have failed to realize the complexity of selling a home. Before you decide to sell your home by yourself here are some things to consider: 1) Setting the right price. Do you have access to all of the sales records for your neighborhood so that you can accurately price your home? 2) Do you have all of the proper disclosures and documents required by law. Yes, you as a FSBO still have to follow Texas Real Estate Law and if you fail to have the required documents you can be sued 3) Are you available 10 hours a day, 7 days a week to show your home to prospective buyers like an agent would be or do you work? 4) Are you screening your buyers first or are you just letting anyone walk through your home 5) Do you have your home on the MLS so that millions of potential buyers can see it, or do you just have a FSBO sign in your yard for a few buyers to see 6) Are you skilled and knowledgeable in negotiating real estate contracts and do you know which forms to use? 7) Are you licensed and insured in case you make a mistake in the paperwork that the buyer could sue you on? 8) Do you have hundreds of potential buyers calling you looking for homes? Be smart, use a professional real estate agent.

MYTH #2: Since tax rates keep going up and many people are protesting their property taxes, the "Market Value" listed on the tax appraisal web site is too high and the home is worth less.

FACT: The "Market Value" listed on the tax appraisal web site has nothing to do with the actual market value of a home. In fact, the value listed on the tax site is usually much lower than the actual market value of the home. The only way to know the TRUE market value of a home is to ask an agent to run a CMA (comparative market analysis) on the neighborhood. The agent will view all of the sales records for the neighborhood through the MLS (multiple listing service) and can accurately tell you what homes are really selling for. You could also hire a home appraiser to come out and do an appraisal on the home, but that costs money. If you are buying or selling a home you should NEVER use the tax "Market Value" as a guide to how much the home is worth because 9 times out of 10 it is not even close.

MYTH #3: If you have bad credit, you cannot get a loan on a home

FACT: Times have changed and so has the lending process. The majority of people today have had credit problems at one time or another, yet most people own homes. You have probably heard that credit problems stay on your report for 7 years, and for the most part that's true, however that doesn't mean that nobody will still loan you money. Most lenders know that people must have a place to live and will usually make their house payment before any other payments, or risk losing their home. Even with bad credit, most lenders will be willing to work with you on a home loan. The catch is, the worse your credit is the higher your interest rate and/or down payment will be. While most homeowners today are getting below 7% interest rates, you may get a rate between 8%-13%. Yes, that's a lot higher, but if you make your payments on time and clean up your credit, you can refinance later at a lower rate. Also, there are many grant programs out there to assist homeowners with closing costs. Your lender should be familiar with these programs and be able to help you qualify (even with bad credit). So you see, almost anyone can get a home loan.

Myth # 4: If I sell my home and make a big profit, I will have to pay taxes on the profit

FACT: Although this may be true in some cases, for most homeowners in the Greater Houston Area there is no capital gain tax. The 1997 Taxpayer Relief Act contained a big break for homeowners. If you sell your home, you may exclude up to $250,000 of your capital gain from tax. For married couples filing jointly, the exclusion is $500,000. The law applies to sales after May 6, 1997. To claim the whole exclusion, you must have owned and lived in your residence an aggregate of at least two of five years before the sale (this rule is called the "ownership" and "use" test). You can claim the exclusion once every two years. There are some rules that apply to home office deductions, divorce etc. so follow this link to see if you qualify http://www.nolo.com/encyclopedia/articles/re/re19.html?e=em2f

Myth # 5: Real Estate Agents cannot help me in finding a "NEW" home because they only list and show previously owned homes.

FACT: Some agents "specialize" in new home sales. Most builders fully cooperate with agents because they want to sell their homes quickly and they know that most people looking for homes will have a buyer's agent anyway. The builder pays the agent a commission for providing a buyer. In fact, many agents can actually help you negotiate a lower price on the home or get some upgrades for free because of their relationship with the builder. The agent can also advise you on the area and the builder and assist you with the contracts, etc. just like he would on any other home.

Myth # 6: You will be able to sell your home for a lot more money if you make many upgrades and improvements to your property.

FACT: Some improvements will improve resale value, however many times you will not get your investment back if you make unnecessary improvements or expensive improvements. For example, if your home is in desperate need of painting and you spend $400 painting it yourself you will probably increase your chances of selling the home and thus recoup the $400 cost. However, if you spend an extra $3000 having the home framed with 2x6's instead of 2x4's and then add imported tile, a water softener, and a waterfall pond in the back yard, you may have increased the resale value of the home but not as much as you paid to have all of that stuff done. If the homes in your neighborhood average 2100 square feet and the sales range from $59-$64 per square foot, you cannot assume people will pay $70 per square foot just because your home has these improvements. Often times swimming pools are a bad resale improvement because you will pay maybe $10,000 for the pool but you won't find buyers willing to pay $10,000 more for your home just because it has the pool. Regardless of the improvements that you have made, your home will still be marketable for what buyers are willing to pay in that neighborhood.

Myth # 7: Sellers routinely list their homes for thousands of dollars more than they are worth so that they will have room to negotiate a lower offer from a buyer.

FACT: Although some sellers will overprice their homes , smart, market-savy sellers will list their home at its true market value and will have already accounted for repairs. The listing agent will assist the sellers with the neighborhood comps and use them as a guide to setting the price. If similar homes are selling for $120,000 it would be ridiculous to list your home at $130,000 in hopes of getting more. Most likely you will turn off buyers that have already looked at the similar homes that were correctly listed at their market value. They will think that you are greedy and not willing to negotiate fairly. If 2 identical homes are listed for different prices the potential buyer is going to ask why. Granted, if there are substantial improvements and upgrades in 1 of the houses that would warrant the price difference. A "Buyer's Agent" will know how to correctly value homes and give the buyer a CMA (comparative market analysis) on the homes that they are looking for. So you see, if the seller has listed his home way over its value, the smart buyers will know this and just pass on through resulting in NO SALE for the seller. Sometimes even when a home is priced right the seller may have to reduce the price because for 1 reason or another his house is not drawing interest and is not selling. If that is the case, the seller should ask his listing agent about the feedback that buyers and their agents have given him about the house.

Myth #8: The agent showing me the house represents me and my interests.

FACT: Unless you have signed a "Buyer's Agency" agreement with that agent, the agent MUST put the interest of the seller first. Texas law requires an agent to give prospective buyers a form called "Information About Brokerage Services" at the first face-to-face meeting with a prospective buyer (unless it's an open house). This form explains that an agent either represents the seller OR the buyer. Even if you call an agent that is NOT the listing agent, that agent still represents the seller as a subagent until you sign a Buyer's Agency agreement asking him/her to represent you. Normally, Buyer's Agents do not charge any fees for their services (a few will ask you for a retainer) because they are paid by the listing agent through Co-Op on the MLS. A few agents, like Silver Star Realty, will even give you rebates at the closing. For more information about Buyer's Agency click here.

Myth #9: If you offer the listing price for a home, the owner must accept it

FACT: As with all contracts, there must be an offer and acceptance. In real estate transactions the contract must be in writing. In today's seller's market it is quite common to receive multiple offers on a property for more than the asking price. The owners can sit back and wait for the best offer to come in. On a "hot" property, numerous buyers are fighting for the chance to get the home and will try to make their offer the best. Keep in mind that this does not apply to all properties. Even today, some homes can sit on the market over a year before someone will make an offer. This is why it is important to have a "Buyer's Agent" representing you who knows the area and what the homes are selling for and who is skilled at negotiating contracts. If you would like to see (or download) a contract used for home purchases go to http://www.trec.state.tx.us/ , this is the web site of the Texas Real Estate Commission.

Myth # 10: The agent that has sold the most homes in the area is always the best choice to sell my home.

FACT: Approximately 10% of homes are actually sold by the listing agent. Which means 90% of the time, some agent that you don't even know will be the one who sells your home. In some cases there are agents who have over 100 homes for sale at the same time. Do you really think that YOUR home is getting the individual attention that you expected when you listed? What is really important is that you choose a knowledgeable, professional Realtor who cares about you and your needs. Not all agents are the same, nor do they offer the same services and fees. Make sure that your home will be on the MLS and that your agent will take the time to properly market YOUR home and not the other 100+ homes in his inventory.