We have all heard the sage words “buy low, sell high” and as an investment axiom, this one is pretty hard to beat. However, in real estate there are some tightly held beliefs that are almost as widely accepted but in most cases, just not true. Below are a few of the most common of these and the reasons why they should typically be avoided.
When listing a home, you should always start “on the high side.” You can always come down.
This is one of real estate’s most pervasive fallacies. It happens when a home seller intentionally overprices a property to leave room for negotiation. The real estate market is pretty transparent, as home sales prices are generally available through public records so there’s clarity as to when, where and for what price comparable homes have sold. Additionally, the residential real estate market is typically very competitive.
In the past month within our city, for all single-family homes listed up to $600,000, the difference between the price the property was listed at and the price for which it sold and closed was only 2%. Home buyers know this and will often refuse to even look at a home that they deem to be out of line with the market. Or, if they look, they will be hesitant to make an offer, as they assume the seller is “unrealistic.” Therefore, overpriced homes sit on the market longer, costing the owner money, and ultimately sell for what the market will bear out or don’t sell at all.
When making an offer, it’s a good idea to start low. You can always come up.
This is the buyer side of the real estate myth outlined above and is typically a mistake for the same reasons. In a transparent market with a very narrow range between list and sale prices an offer that is unrealistically low is likely to alienate the seller who will often give limited consideration to a counter or reject the offer entirely. While there is nothing wrong with trying to get the best deal, in a competitive market like ours a buyer is often competing against other offers or they risk the seller receiving another offer while negotiating back and forth. Either of these situations effectively reduce the buyer’s negotiating ability.
Buying a house without an agent representing your interests gets you a better deal.
When a person enters into an agreement to sell their home with a real estate brokerage, they agree to offer compensation for the services that brokerage provides. The brokerage then offers a portion of that fee to any other brokerage that represents a buyer. If there is no buyer’s brokerage involved, the entire fee is typically retained by the broker representing the seller. So, there is no incentive for the homeowner to “sell direct” Additionally, there’s no cost to the buyer for the benefits of their agent’s services which include finding the right home, offering advice based on market knowledge and current trends, negotiating contractual documents, and navigating the dynamic and potentially complicated period of time between the deal being signed and the buyer receiving the keys to their now home.
I can ascertain my home’s value online (or, if Zillow says it then it must be true).
Online valuation services are a fast and entertaining place to go for a casual look at home values but are by no means accurate predictors of the market value of a home. Zillow states on its website that the Zestimate is to be used as a “starting point only” and further states, “For most major markets, the Zestimate for on-market homes is within 10% of the final sale price more than 95% of the time.”
That means on a $500,000 home, it’s statistically probable that there is a $100,000 range between the Zestimate and the actual sales price of the property. It takes a person studied in the nuances of the local marketplace who understands current market trends and demands, and most importantly, who has actually seen the home to provide a homeowner with an accurate value of their property.
Real estate investment just isn’t for me.
Most of us have heard that over time, real estate is one of the best investments that a person can make. But, most people assume it’s out of reach. In many cases, this is just not true. There are investor loans currently available with surprisingly low down payments or a group of would be investors can pool resources and buy as a group. Another option popular here in Flagstaff is to purchase property with an additional dwelling unit. You can live in one while leasing the other for income.
While it’s always a good idea to consider commonly held ideas and beliefs, when buying or selling real estate, it’s best to ditch the mythology and rely on sound market knowledge instead. FBN
By Dylan Kennedy
Dylan Kennedy is the managing broker of Russ Lyon Sotheby’s International Realty in Flagstaff, located at 1750 S Woodlands Village Blvd. #200. Reach Dylan at 928-779-5966 or Dylan.email@example.com