The real estate world is full of myths. Myths that prevent people from making smart decisions when buying and selling and keep people from maximizing their real estate returns.
Let’s count down the top five biggest real estate myths. And debunk each one!
Myth #5. You shouldn’t buy right now because interest rates are rising.
Rising interest rates are a great reason to buy right now!
Historically speaking, interest rates are still exceptionally low. Throughout the 70s, interest rates ranged between seven and 12 percent. The 80s saw double-digits, reaching over 18 percent at one point. The 90s were more in the seven to nine percent range.
Today, you can still get a mortgage loan under five percent with good credit. If you plan to buy, do it now before rates rise!
Myth #4. You need a 20% down payment to buy a house.
This myth is a relic of previous generations, when you really did need a 20 percent down payment to get a mortgage and buy a house. That was when homes prices were $100,000, so 20 percent down was a large but manageable $20,000. Now that home prices in some major metro areas top $400,000, lenders have come up with different financing arrangements for all of us who couldn’t possibly come up with an $80,000 down payment.
One of the most popular options for low down payments is an FHA (Federal Housing Administration) loan. Not only do FHA loans provide a route to home ownership with as little as 3.5 percent down (just $14,000 on a $400,000 home), but they can also work with less-than-stellar credit.
Don’t dismiss buying a home because of the down payment, talk to a lender and explore your options.
Myth #3. Real estate investing is just for the rich.
It’s easy to see where this myth comes from: real estate typically requires a substantial investment, so people assume it’s only for investors who have money to spare.
But there are so many ways for the 99 percent to start investing in real estate! Instead of buying a single-family home, buy a duplex or triplex. You can live in one unit while you make money renting out the other units. You can also take advantage of low down payment programs or find investment partners and pool your money to purchase your first investment property.
Myth #2. You need to leave yourself room to negotiate when deciding on a list price or offer.
Sophisticated buyers and sellers don’t have time for games.
If you over-price your house to “leave room to negotiate”, buyers will assume you’re unreasonable and will steer clear. And sellers will dismiss low-ball offers from buyers just as easily.
If you’re serious about buying or selling, stick with real, reasonable numbers from the very beginning.
Myth #1. Going for sale-by-owner will save you money.
It’s tempting to cut real estate agents out of a real estate transaction to avoid paying the commission. But it can actually cost you money.
First, your home will sell for less. You don’t have the connections or marketing reach of a real estate professional and buyers who only look at for sale-by-owner are typically looking for a steal, so they offer less.
Second, you’ll spend your own time and energy on the transaction, and your home will sit on the market longer. Time is money!
Third, what if something goes wrong? Are you prepared to navigate the unusual legal and financial issues real estate agents deal with routinely? A single missed clause in the contract could potentially cost you thousands.
Don’t fall for this myth. To protect your financial interests, hire a professional to represent YOU in your real estate transactions.