5 Common Homebuying Myths Debunked
Don't let what you think you know derail your dreams of home ownership. Here are 5 common myths associated with home buying:
MYTH #1: Working directly with a seller without a buyer’s agent will get buyer a better deal.
You don’t know what you don’t know. A real estate transaction needs a critical eye and knowledge of the paperwork requirements, general rules, and laws. It is the single largest investment most of us ever make. It requires an enormous amount of energy, effort and research. A buyer’s real estate agent can step in, initiate and track the buyer’s transaction, negotiate price and contract terms, and help uncover pitfalls of a particular house or the market in general based on prior experience and know-how.
Keep in mind the seller is going to pay the commission whether or not there’s a buyer’s agent. Let’s repeat… the seller is going to pay the commission whether or not there’s a buyer’s agent. The listing agent will simply make double the commission. There’s no savings to the seller or buyer when the buyer doesn’t have an agent (exception: the seller’s agent discounts their commission).
In 99.9% of real estate transactions, the buyer’s agent is provided at no cost to the buyer. Why would you choose to do it alone?
MYTH #2: A buyer must put down 20% to buy a house.
This is probably the most common and most harmful home buying myth. It keeps renters in the rent race and stifles home ownership. Traditionally a buyer received a 30-year mortgage loan with 20% down. Oh have times changed. Today there are many mortgage loan options available to buyers based on their credit score and income. There are down payment options as low as 3%, credit scores as low as 620 (lower in some cases, but be careful with this, the loan will cost more) and down payment assistance programs available for buyers with low to moderate incomes.
Tip: Absolutely under no circumstances should a buyer ever accept a loan they cannot afford. In addition, credit and financial preparation is recommended.
MYTH #3: Buyers should never offer full price.
Believe in this myth in a seller’s market and you’ll be disappointed as your offers get rejected. The market determines how hot, warm or cold your real estate bid or offer needs to be. In a seller’s market, which we are currently experiencing in Dallas, many buyers are offering over asking price to get the home they want.
Don’t let your dream house slip away. If you really want a particular house, you’ll want to present a strong offer leaving room to up the ante if your offer is countered or rejected. While a real estate agent wants to negotiate the best price for the house you want, they have other ways to save you money within the terms of the contract while still offering full price. An experienced agent knows how to position you as a buyer to get noticed. He/she also has an idea, based on market value, price, and condition, which houses should get a lower offer, a full price offer, or an over-bid. You won’t win them all, but you’ll have a much better success rate.
MYTH #4: The best time to buy is spring.
Houses sell all year long. Buyers buy houses all year long. The best time to buy is when you are emotionally and financially ready to buy and a seller needs to sell. Serious sellers and sellers who may be willing to negotiate, put their homes on the market when they need to sell. Put another way, homes listed during non-peak times could be listings of highly motivated sellers. Just focus on what you and your family’s needs are, such as getting settled in prior to the upcoming school year, taking advantage of a summer off, relocating for a job offer, or moving into your new home just in time to have your first Christmas as a family.
If you choose a neighborhood where you want to live and choose a home that’s attractive and structurally sound, then you probably won’t go wrong. The home only needs to fit one family – yours, no matter when you buy.
MYTH #5: A loan buyer can’t compete with a cash buyer.
Cash is not always king. Cash buyers expect a discount because they’re typically offering cash and a quick close. No wait time for loan approval is needed.
Not to worry.
There are some things you can do to ensure your offer stacks up. For starters, your mortgage loan officer should be able to offer a quick close if they get you preapproved prior to putting in an offer. If you have all your financial ducks in a row and can present a preapproval letter with your full price offer, you may be able to shoot for a close in 2 weeks vs 30 to 45 days.
Secondly, many long-term homeowners like to know that there’s a real person and/or family behind the offer. When a seller is faced with two similar offers—one from a cash investor and the other from a person who really wants to become a member of the community and live in the house – and makes that known—a buyer with a solid offer and pre-approval may be selected over an all-cash investor.
In most cases, it is not in a seller’s best interest to discount the price of their house if it is priced fairly and in good condition.
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This has been a quick tip by LandlordBreakup.com, the website for smart renters. If you're a renter who is curious about how you can turn your rent payment into a mortgage payment, check out our home buying course and home ownership plan for renters. Check out the course.