Even with the plethora of real estate information and advice on the web these days many buyers are still misinformed when it comes to the home buying process. When you tell someone that you are looking to buy a home there is no shortage of good and bad information given by your friends, family, co-workers, relatives, real estate TV shows and just about anybody else. There are too many arm chair quarterbacks out there when it comes to finding and buying a home. Be careful listening to these people because there is a pretty good chance that most of them don't have the experience or knowledge necessary to be giving advice. Just because I have eaten at 1,000's of restaurants in my life doesn't mean I know how to operate one.
Here are 8 myths about the home buying process that you might find interesting.
1. Hiring 2 Realtors to find a home won't result in a better experience
You might think it is a wise idea to hire 2 agents to help you find a home but it usually isn't. This is especially true if both agents know about it. You might end up working with two disgruntled agents that give you a halfhearted effort.The reason for this is that we only get paid when we represent you in a closed sale. So, one of the agents ends up working without being compensated. It is better to hire just one good Realtor.
2. Realtors are paid a salary and the commission is 'extra'
Perhaps this will change in the future due to the real estate industry being targeted by disrupters but right now Realtors only get paid at the end of the transaction through a commission. This lights a tremendous fire under us to find the dream house for our buyers.
That usually entails at least 20 trips back and forth to show buyers homes, finding out answers to the buyers’ questions, triangulating between the listing agent, homeowners association, county and city, researching public records, making phone calls to the mortgage lender and a 1,000 other little details that are involved with a transaction.
We must then spend the time explaining how all this works to the buyers, write offer after offer and cancelling or rearranging personal plans so that we can show the buyer a house so they don’t miss out.
All of that is done without a paycheck the day the agent starts working with the buyer.
If the buyer decides to purchase and purchase through that agent, and only if that transaction goes to closing will the agent get paid.
How long the process takes from end to end is anyone’s guess, and could range from a couple of months to years, depending on the buyer.
3. Realtors are overpaid
Really? Sure, like every other industry, there are Realtors making millions. But, let's talk about the average agent. According to an article from Salary.com - What Real Estate Agents Earn in Every State, as of January 2019, the average annual earnings for a real estate sales agent was $41,289. In Florida the 2017 mean annual wage was $57,520.
That really isn't that much when the income is sporadic and risky. Risky in that a transaction (and the income from it) can fall apart at any moment for a myriad of reasons that are out of the Realtors control.
4. There is nothing wrong with calling listing agents to show us homes if our agent isn't available
Buyers tend to think, “We hate to bother them every time there is something we see of interest.”
This approach can and will backfire on a buyer.
A listing agent's job is to represent the seller. Buyers who ask them to show their listing put everyone in a precarious professional situation. Agents don’t like to step on other agents’ toes and do not want to be put in an awkward situation.
While buyers can still use whatever agent they want to assist in writing an offer, the entire scenario can create a lot of bad feelings with the listing agent being put out after doing a lot of work meeting the buyers at the property and providing information and details, and so forth.
If a buyer has an agent, they need to work through their agent for all showings. Agent communities are small worlds in that word will get out very quickly about the buyers calling every listing agent in certain areas to see homes on their own.
Listing agents will grow suspicious and will surely want to know which agent the buyer is working with, whether they have been pre-approved and what their status is, as far as being able to buy a home.
5. A house 'passes' or 'fails' an inspection
False. The purpose of a home inspection is to provide an overview of the home’s condition at the day/time the home was inspected, along with an assessment of each component in the home as to whether it is functioning in the manner which it was intended to do. An inspector does not state whether a home “passes” or “fails.”
6. Buyers can and should ask for every item found on an inspection report to be fixed, whether is it an actual repair or even cosmetic in nature
Not so fast. Inspection are a negotiation point. Just because an inspector puts it on a report does not mean it is something that has to be requested to be addressed.
An inspector needs to be thorough in their observations for the purpose of raising an awareness and informing the buyer about the property they are going to purchase.
While a buyer should discuss with their agent what repairs — if any — should be addressed by the seller, this is another negotiation point in the transaction that could involve some back-and-forth, depending on what is being requested.
It will likely be a compromise. If an item is a suggested improvement — such as adding gutters, this is something the seller will likely not do.
The seller may prefer to reduce the price or offer a credit toward closing costs in lieu of them doing some or all of the repairs.
7. The lower I offer, the more the seller will come off their asking price
Au contraire, my friend. In real estate, usually the lower the offer means the less the seller will counter — or in some cases — not at all.
Unless it is truly justified, offering a significantly lower price for the sake of it can put the seller off. They may think the buyer is not serious and completely shut down.
The buyer will then have to come back at another price to see if they can get the seller to restart negotiations.
8. The bank will send someone out to tell me if I am paying too much
Not exactly. The lender doing your mortgage load will send out an appraiser to conduct a valuation of the property for the bank that will be providing the loan.
The appraiser will not tell the buyer what to pay. An appraisal is subjective and defined as an art and not a science. Some appraisers are more conservative in their adjustments, and some are more generous, all while staying within lending guidelines.
Depending on the contract, if an appraisal comes in at less than the price you are paying for the home, that does not obligate you to buy the house, but at the same time, that does not mean the seller must sell it to you at the appraised value
This becomes a renegotiation point between the buyer and seller. Both parties could agree to split the difference, or the seller could come down in price but not want to offer other concessions that they had previously agreed to, such as paying for closing costs, a home warranty or doing repairs.
If the market is really hot and the property is in high demand, then the buyer may have to pay out of pocket for the difference.