10 real estate myths that you need to know
The spring season is a peak season for real estate and despite the current sub-freezing temperatures, it is just around the corner.
When three @properties’ brokers were recently quoted in an article on GO Banking Rates about common real estate myths that you need to know, we decided to debunk a few of them ourselves.
Before the spring market begins in full force, here are 10 real estate myths that you need to know if you’re planning on buying or selling a home.
Real Estate Myths: Pricing
Myth: Overpricing is a good strategy
Tricia Fox, a Streeterville luxury real estate broker said that sometimes sellers want to price a home high, test the market and reduce the price later.
“This happens often, and generally results in less positive results for the seller. Everyone has a computer and can compare appropriate prices in their market,” Tricia said.
The reality is the opposite.
“Because buyers’ agents often sort by price, a significant number of potential buyers will simply miss the rollout. The home sits stagnating and the seller misses that all-important exciting rollout opportunity.”
Tricia noted that buyers will assume something was wrong with a house which sits on the market and suffers multiple price reductions to bring it down to where it should have started.
“Had it been priced right from the beginning, it would more likely have been sold at the right price.”
Myth: Sellers should leave room for negotiation
Carrie Goodman, a Libertyville real estate broker, has seen sellers believe they have to build a buffer into their price instead of pricing at market value to leave negotiating room.
“Leaving too much room will cause you to not attract the right buyer, and ultimately result in a lower sales price and longer days on market,” Carrie said.
Myth: Every listing is marked up
Many buyer clients ask Brad Zibung,a Bucktown real estate broker, general questions like: “when we find a property we like, what percentage of list price should we offer?”
Zibung says that the answer to this question (like so many others in real estate) is “it depends.”
“Buyers and their agents have to do market research to determine if the list price is fair,” Brad said. “Sometimes, the sellers get the price right or even underestimate the value of their property.
Brad added, “going in with a well-researched initial offer price as opposed to simply assuming the property is marked up by a certain percentage can ultimately help get a deal done at a fair price.”
Real Estate Myths: Negotiation
Myth: Overpricing leaves you more room for negotiation
Pam Lynch, a Gold Coast real estate broker, has had clients assume that overpricing a home will leave more room for negotiation with prospective buyers.
“They say they have all the time in the world to wait for the best price,” said Pam. “In reality, it can backfire.”
She added, “a too-high price will scare of a portion of interested buyers. An inflated price causes your on-market time to drastically increase.”
This is damaging because one of the first questions buyers ask is how long the home has been on the market, and when they see a longer-than-average market time, it will raise concerns.
Myth: The first offer is always the best offer
“Sellers should be educated and informed that offers are usually a good thing – there is interest in the property – but that there are various terms to be negotiated, including price, closing date, credits and condition,” said Chris Mundy, a Bucktown real estate broker.
“These can take a few days to negotiate before a seller decides whether or not to accept an offer. Negotiation usually goes back and forth a few times negotiating these various points; timeline of negotiations could be a few hours to a few days.”
More than a few days of negotiations is rare, Chris adds.
“Sellers should always be appreciative and excited to receive an offer, but that first offer is merely a starting point.”
Myth: All buyers want to negotiate
While buyers typically do want to negotiate the more accurate the price the less negotiation there is.
“Although this myth has been debunked for years a seller always asks ’shouldn’t I leave room for negotiation in my price?’ The answer is no,” said Juliana Yeager, a Lakeview real estate broker.
“You should price accurately right out the gate which will reduce market time and capture a buyer quickly and efficiently.”
This often leads to the second seller myth when you get an offer quickly: “did I underprice it?”
“Again, the answer is no,” Juliana said. “You and your broker priced the property accurately and achieved the goal of selling your home efficiently.
It is important to know that the two truths to the myths go hand in hand and a seller should understand that when your home is priced right you need to be prepared to receive an offer and sell your home.
Real Estate Myths: Inspection
Myth: Home inspections are simple
“Back in the day, when I started selling real estate, buyers didn’t do home inspections,” said Greer Haseman, an Oak Park real estate broker.
“Until recently, the home inspection was usually done by one person and lasted a few hours.”
As the market evolves, Greer believes that we are seeing the advent of the “super inspection.”
“These super inspections not only cover the systems and structure of the house but also include a radon test and having the fireplace chimney and sewer lines scoped,” said Greer.
“These inspections are multi-faceted and usually done by different experts and can span multiple days.”
Buyers are doing everything they can to identify hidden costs lurking beneath the surface. This applies to property of all ages, even newer or renovated construction.
“Buyers and sellers usually, but not always, share in the cost of the repair since the seller is delivering a product that needs something significant done but once completed, the buyer will have the benefit into the future,” said Greer.
“I like to explain it as the time value of the repair. Both buyers and sellers should have that phase of the transaction thoroughly explained in advance of a contract to help mitigate a stall in the transaction or even a failed transaction.
Myth: An inspector’s job is to find something wrong
Many first-time buyers have asked Janet Keough, a Lincoln Park real estate broker, why they must spend $300 (give or take) to have someone tell them the place they are in love with is no good.
“I explain to them, to the best of my ability, that an inspection is merely a way to fact check what the owner and listing agent have told us, and inform them (the buyer) of any issues small or large that may need to be addressed before they sign over a large sum of money,” said Janet.
“Ensuring they understand there is no ‘perfect’ place is key.”
Janet asks her buyers questions like,” can you handle fixing a few light-bulbs and having the HVAC cleaned? Is water damage and cracked tile too much for you to deal with?
“Each buyer will define ‘perfect’ for their situation and desired living experience, and an inspection is merely another way to make sure they are making a wise investment,” Janet said.
Real Estate Myths: FSBO
Myth: A buyer can save more money working directly with the listing agent
“The commission is determined between the listing agent and the seller so any perceived savings is not reality based,” said Mark Jak, a Lincoln Park real estate broker.
“The listing agent would simply keep the whole commission rather than splitting the cooperating commission with a buyer’s broker.
“In addition, the listing agent is working for the seller and not the buyer, your best interests are not represented during the transaction. Having a buyer broker working for you can save you thousands of dollars as they are expert negotiators and are looking out for your best interest and not of the seller.”
Myth: A seller can save more money without a listing agent
“Some sellers think that going the For Sale by Owner route will save them the commission they would have had to pay their real estate agent — and that is true,” said Christina McNamee, a Bucktown real estate broker.
“The average FSBO home sold for $185,000 last year according to the NAR, so the seller would save about $11,000 in commissions.”
Christina added, “the average home sold by an agent went for $245,000. This is a $60,000 price increase. While there is still a commission to pay, the seller will net a higher return on their home, and they will not pay for the cost of marketing their home, have to schedule or participate in showings, or participate actively in the negotiation process.”
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