Myths & Realities About Buying & Selling
Myth:
The Internet is taking over the role of the real estate professional in housing transactions.
Reality:
Despite the increasing number of information sources accessible to consumers, including the Internet, home buyers and sellers continue to trust the experience and "know how" provided by real estate agents and brokers. According to the 2003 National Association Of RealtorsŪ Profile of Home Buyers and Sellers, about 71 percent of homebuyers and sellers used a real estate agent to assist with the transaction. Moreover, about 40 percent of home buyers used the Internet as an information source during the real estate process, and interestingly, Internet-proficient home buyers were the most likely to use a real estate agent to complete their home search and close the transaction.
Myth:
Home valuation and evaluation information available on the Internet is reliable.
Reality:
This is not necessarily true. Most of the information available on Internet sites is drawn from public records, with no verification of the data. Too, public records are historical and may not provide a true indication of current trends that can affect a particular property or the property's specific characteristics when it is sold. In contrast, retaining the services of both a qualified appraiser and real estate agent (Certified Residential Specialist) in a given market will help ensure reliable, up-to-the minute feedback on local market dynamics and specific properties in question based on current, first-hand knowledge and professional experience.
Myth:
Buying and selling a home is always a "gut wrenching" process.
Reality:
Oftentimes, there's a lot of stress in both. On the other hand, a good RealtorŪ, aided by other professionals involved in the real estate transaction, can and should help the buyer and seller understand what to expect and sound moves to make, thereby helping to make the process relatively smooth and "pain free."
Myth:
Assessed value should equate to market value.
Reality:
While most states assume that assessed value approximates market value, this often is not the case. For example, differences occur when interior remodeling has been done and the assessor is unaware of it, or when properties in the vicinity have not been reassessed for a long time.
Myth:
Market value should approximate replacement cost.
Reality:
Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind, given that the land cost has not changed.
Myth:
Appraised value and assessed value are the same.
Reality:
Not so. Appraised value is a knowledgeable and researched opinion of a property's market value based on an appraiser's knowledge, experience, and analysis of the property and the community where it's located. Assessed value is the valuation placed on a property by a public tax assessor for purposes of taxation.
Myth:
You generally can tell what a property is worth by looking at the outside.
Reality:
Property value is determined by many factors - including location, interior and exterior, condition, improvements, amenities and market trends.
Myth:
If you put $15,000 worth of improvements into your property, you should be able to increase the asking price by that amount.
Reality:
If your improvements have simply brought the property up to standard, you have only made your home more competitive, not more valuable. Some home remodeling, in particular kitchens and bathrooms, can equal or exceed the cost you invest. On the other hand, adding an amenity such as a pool could provide only a 30 to 40 percent return on your investment. However, the rates of profit vary from one marketplace to the next. It's best to consult with a CRS-designated RealtorŪ in your area before you begin a major remodeling project to find out which improvements offer the best returns on investment.
Myth:
You can realize a tax-free capital gain on the sale of a primary residence just once, at or beyond age 55, and must reinvest the proceeds in another home within a certain time period.
Reality:
These were the regulations prior to the 1997 tax law, but the rules changed. Now, if you have owned and occupied your primary residence for at least two of the past five years, you can enjoy tax-free appreciation of up to $500,00 on the sale of the home if you're married and up to $250,000 if you're single. You don't need to re-invest the proceeds in another home and you don't need to be age 55. What's more, you can legally do this every two years if you so choose.
Myth:
As a buyer, you should first find the home you want and then explore your borrowing options.
Reality:
It is best explore your borrowing options and secure a mortgage pre-approval from a lender before you go searching for a home. This "upfront" information provides a reality check that you'll be looking in a price range you can afford. Moreover, when you make an offer on a home and it is accepted, all you'll likely need to go forward with the financing is an appraisal.
Myth:
In the view of sellers, they gave their home away; in the view of buyers, they paid too much.
Reality:
In point of fact, all transactions reflect a meeting of the minds. If the buyer and seller are mindful of what the market is telling them and they have good, professional representatives who negotiate skillfully on their behalf, they will respond accordingly.
Myth:
As a move-up buyer, I should put my existing home on the market first and then look for a new one.
Reality:
Not necessarily. It depends on factors such as general market conditions, market conditions in your particular geographic area, the kind of equity you have in your home and your general financial picture. If your existing home is very marketable, many finance programs are available that will enable you to take that home's equity, use it as a down payment to buy your next home, then put your existing home on the market and be reasonably confident that things will work out well for you.
Myth:
As a seller, if I don't get more for my home than I paid for it, it means I overpaid.
Reality:
Not necessarily. All sellers hope to realize a gain on their investment. But there are no guarantees. While a purchase price may be a very good deal, the market can shift downward in ways that are unforeseeable.
Myth:
As a buyer, if I retain a buyer's agent to represent me, I'm responsible for the commission.
Reality:
While some buyer's agents do have retainer or hourly fees, it is more typical for the seller to pay for the commission when the house is sold. According to the 2003 National Association Of RealtorsŪ Profile of Home Buyers and Sellers, in 52 percent of the cases, the home seller fully compensated the real estate agent serving the home buyer.
Myth:
As a buyer, it makes more sense to come in with a low offer on a property, reserving he right to raise it.
Reality:
Not necessarily so. You run the risk that the seller will not even bother to negotiate because you're so far apart. As well, unless the house is very overpriced, the offer will most likely be rejected.
Myth:
All real estate agents as well mortgage lenders, home inspectors, appraisers, real estate attorneys and other key players in a residential real estate transaction, do business in essentially the same way.
Reality:
Absolutely not. The scope, quality and cost of services provided by individual providers can differ significantly. So given the financial magnitude of a real estate transaction and to help ensure the most problem-free transaction, consumers owe it to themselves to do their homework - on the Internet, by asking for friend/family referrals and/or otherwise - before selecting a particular provider.
Myth:
Because only 4 percent of residential realtors carry the CRS designation and must exceed higher levels of experience and education than do other RealtorsŪ, they charge a premium for their services.
Reality:
Not true. However, CRSs have proven experience in real estate, and can offer better service and more extensive knowledge than the average licensed real estate professional. In addition, CRS designees can be found in every U.S. marketplace. Go to www.crs.com and look them up under "Find a CRS."
