Five Common Real Estate Myths

Some of the most common ideas in Real Estate have become known as fact or gospel. It is always good to step back and remind ourselves of what is fact and what is fiction. If Myth Busters did an episode on Real Estate, I believe these would be their top 5 findings.

                                                Five Common Real Estate Myths

                                                 You Need to Put 20% Down

                                                 Appraisal Results are Final

                                               Renovations Always Add Value

                                           The Highest Offer is the Best Offer

                                          Spring is the Best Time to Buy or Sell

You Need to Put 20% Down

As a buyer, putting 20% down can have its advantages but is not absolutely necessary for most Americans. There are a number of funding options where you can put as little as 0% down - 20% down.

VA Loans - Designed for the Military and their spouses, these loans may require no down payment while avoiding Private Mortgage Insurance (PMI)

Conventional Loans - Typically range from 3.5% - 20% down. PMI may set in below 20%.

FHA Loans - Typically range from 3.5% - 20% down. PMI may set in below 20%.

Loans w/ Down Payment Assistance Programs - Available at a Federal, State or Local Level.

Seller Financing - Everything becomes negotiable! The down payment, the interest rate, the payoff date, interest only vs an amortization schedule and the list is virtually endless. It is even possible for the Seller to pay you to buy the place! Crazy, but it has happened.

Appraisal Results are Final

Many people think that when a bank sends someone out to do an appraisal, their word is iron clad. I have found over the years that this could not be further from the truth and is widely misunderstood across the industry.

Appraisers are people too. They work in companies, some big and some small. Some have good bosses and some suck at their jobs but still remain in a place of authority. Whether intentional or not, they can and do make mistakes.

No one knows your property as well as you. They may choose comparable properties that should not be included in the report. They may make an internal adjustment to rent per square foot that you don't agree with. They may not properly capture the growth of a community based on their own proximity to the job.

You can push back and should. If the appraiser refuses to budge the bank will often work with you to get the loan terms you need to see the deal through to completion.

That last statement is really worth repeating, PUSH BACK if you are not happy. They may bump your appraisal value or the bank may improve your terms. The worst they say is no.

Renovations Always Add Value

Done correctly, renovation should always add value. Done incorrectly, they can be a waste of time, money and energy.

You should do your own due diligence on this one but if you’re still reading this, you likely want some guidance so let's give it a shot.

High Value Add Renovations

Curb Appeal: Lighting and Landscaping

Refacing or Replacing Kitchen Cabinets and Pulls

Updated Appliances - Reasonable Upgrades Are Fine

Replace Bathroom Vanity, Lights and Mirror

Refinishing Hardwood Floors

Add Smart Thermostat and Smart Locks

Low Value Add Renovations

Luxury Kitchens (Unless in a High End Community)

Replacing Carpets (Unless Cleaning is NOT an Option)

Covering Up Ugly Hardwood Floors

Garage Renovations of Any Kind

Solar of Any Kind

Pools or Permanent Spas

The Highest Offer is the Best Offer

Let me be very clear, the highest offer may very well be the best offer on the table! In some scenarios, a seller may have to consider what their main goals are when selling.

Do you need cash quickly? Maybe the closing date matters the most to you.

Have you been burned by a bank before? Maybe a cash offer sounds more attractive.

Done negotiating and/or fixing things? Maybe an offer without contingencies wins.

This may seem obvious and may not seem like it deserves its own section but it does! You as a seller need to really know what matters most to you going into a sale, this will help you make decisions with more confidence as multiple offers roll in all with different deadlines to respond.

As a buyer, if you know you won't be the highest offer on the table, think about other ways you can get the seller what they need to feel good about agreeing to your deal!

Spring is the Best Time to Buy or Sell

I will only make a small tweak to this statement, “Spring is the MOST COMMON Time to Buy or Sell”.

If you are looking for volume as a Seller, spring is definitely best. If you want to hit as many open houses as possible on any given weekend, you want to be a Buyer in the Spring.

Both Sellers and Buyers in the off seasons tend to be more motivated. If you are a serious buyer and see an open house on a holiday weekend, go and consider making an offer because the rest of the world is likely taking the weekend off.

Real Estate is complicated enough. It is good to remind ourselves what is true vs what is common. Real Estate is one of the only fields where pretty much everything is negotiable. Don't be afraid to ask questions! You may end up getting an answer you like.