It is easy to get into a loophole of misinformation on social media and word of mouth. Make sure the person you are getting this information from is someone you trust. Always ask questions! Listing below I have common misconceptions of what happens within the process of buying or selling real estate.
Looking at homes is the first step of home buying:
Assuming that you will be financing the home, the first step is getting a pre-approval letter. This ensures that you will be purchasing within your budget and not looking at homes out of your range. A pre-approval letter is the best resource for you to be ready to put an offer on the home as soon as you are ready. Depending on the market, time can be of the essence so you will want to be completely prepared when you decide to write up an offer.
A downpayment is the only upfront cost:
Keep in mind most costs are negotiable, although the two main upfront costs are your down payment and closing costs. Closing costs include inspections, appraisal, title insurance, title transfer fees, etc. Your downpayment is an upfront payment to the lender. You will talk with your lender to determine how much you can afford and how much of a down payment you will have to put down. There are programs available from 0% to 20% down.
Another important thing to note, in the market we are in right now (Spring 2023) it is a very common thing for buyers to buy down their rate. This upfront money will save you substantial money in the long run by being able to get your interest rate down.
Getting pre- approved will negatively impact your credit:
The first step, once talking to a Lender, is to get pre-qualified. Getting pre-qualified causes a soft pull on your credit. Most lenders will do this as you are just starting the process and looking at homes so you get a rough estimate of what you can afford. You then will get pre-approved once you are ready to put an offer on the home, which is a hard pull. A hard pull significantly impacts your credit score, although a pre-approval can last months. I would suggest by this time you have stopped shopping around for a Lender and only get pre-approved by one. During the pre-qualification process is a great time to see what Lenders can get you the best deal.
Schools don't matter if you do not have kids:
Purchasing a home is a long term investment. Although you do not have kids and do not plan to have kids, within the next 10 years life can change. During this time you will want to have peace of mind knowing your kids will be going to a good school.
Also, when it comes to selling your home down the line, it will appeal to buyers to know they are in a good school district. In turn, valuing your home higher and getting a better return.
Buying is always financially better than renting:
Albeit your monthly payment may be around the same amount as owning a home. There are other key points you have to think about when it comes to owning. There are upfront costs such as closing costs and downpayment. Over the long term you have to consider real estate taxes, monthly and yearly maintenance, interest on your payments, etc. It is also important to note when you are looking to relocate you will have to pay all these fees again.
If you are looking to live in an area for a short term. It will be important to compare results of monthly payments, maintenance of the home, and lump sums of money at the start and end. When it comes time for you to relocate, I would suggest talking to your local lender or real estate agent. You do not have to tlak to these professional when you are looking for a home, it is good to get in contact to get the basic information of whats in your best interest.
Set your home at a higher price than what it is worth to make more money:
This statement could not be more wrong! It is proven within the real estate market when a home is priced accurately it sells significantly faster. Pricing your home higher can cause it to stay on the market longer, have limited interest, and can ultimately cause you to lower the price more than planned.
Do keep in mind how the real estate market is. Depending on if it is a sellers or buyers market will significantly affect the price by the amount of competition there is.
Negotiating down your Realtors commission will save you money:
As much as you want to save money, Realtors need to make money. On average working with a Realtor closes your home faster and for more money. It is important to know that they are putting their professional expertise in your home to maximize your home's potential. They inform you on every step of the process, show up to appointments you cannot make, advertise your home effectively, negotiate on your behalf and so much more. The buyer's agent also puts in a lot of time going to showings with their client and putting in offers to homes. Instead of trying to negotiate the commission down, hire a Realtor that you trust to get the job done effectively and are worth the percentage of your home.
You don’t need a Realtor when looking for a rental:
Realtors are not just for buying and selling homes. You can also have a Realtor when looking to rent. It is important to note that not all Realtors work on rentals.
They can help you answer all the questions you have. It can be intimidating talking to listing agents and property managers yourself. You also get a professional for the area, knowing what areas are exactly what you are looking for and are in your budget. A Realtor will also walk with you through the property and to the best of their ability note that everything is in working order and there are no leaks, etc.
Looking on third party sites for rentals can be difficult because the homes may not be available or maybe not in the price range you thought it would be. Having a Realtor can protect you in the long run and they are totally free to you, so why wouldn't you use one?
Your pre-approval amount will be your loan amount:
The loan number is ultimately determined by the appraisal. Although the home can be under contract for a certain price, that does not mean the bank will allow it. If the appraisal does not come back as the number under contract. This is an important thing to note when looking to buy, you always want to get an appraisal, because the home may not be worth the amount you are under contract to pay. You are protecting yourself if you get an appraisal, because that leaves room to negotiate the price based on what the appraisal comes back as.
You also do not have to use the entire pre- approval amount when putting an offer on your home.
You need to stage your home for it to sell effectively:
The reason why you would want to stage your home is because it shows the maximum potential of each room in your house and shows the buyer the great possibilities of the home.
The matter of fact is that not everyone needs to stage their home for it to sell quickly. If you plan to do an open house it is highly recommended that it is staged or at least you leave some of your belongings in the home to be positioned effectively. Another great reason for staging your home, is if you have open floor plans, when there is a lot of room to fill, the buyers might have a hard time envisioning what they can do with the area.
If you want a fast sale, the most effective tool is to price the home appropriately with your market, advertise the home forcefully, and allow as many showings as possible.
If my home isn't perfect, no on will buy it:
There are many people in your local area that specifically look for homes that need work. This could be your local real estate investor or can be a family with a renovation loan. Perfect homes rarely ever come up on the market. The important thing to know is how much work needs to be done and based on that will determine how you advertise the home.
The highest offer is the best offer:
This is more of a personal preference, it is so unlikely that you will get two offers that are completely the same. The thing you have to realize is what appeals to you. Do you want the highest offer? Do you want to accept an offer contingent on them selling their home first? Do you want a fast closing with cash? Are they asking for seller subsidy? There are so many variables to consider when you are getting offers. I would suggest knowing what appeals to you the most before you start receiving offers, it will make it much easier when they start rolling in.
You as a seller, have to schedule all the appointments to get your home ready:
One of the best parts of obtaining a Realtor when you are selling, is that you almost never have to lift a finger. Realtors are there to schedule appointments such as inspections, estimates, showings, etc. They are there to inform you on the information at hand, you do not have to go!
After you're pre-approved you can take your time to find a home:
Although you want to get pre-approved early in the process, it does not last forever. It is usually a couple of months, long enough to look for a home efficiently. With an approval you are also getting to know your interest rate, since interest rates change every day, an approval allows a rate lock. This way you know exactly what interest you are getting on your home before you make the decision to purchase.
