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Deerwood Realty and Friends Podcast
I saw this article on Yahoo, I’ve linked to it in the description below, and I just wanted to go over some of the high points and see if I agree with it. Two part series!
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Thoughts/questions:
- Myth: Looking at homes is the best first step. Does anyone really believe this? The best first step is getting a mortgage pre-approval or finding a solid buyer’s agent to help guide you through the process
- Myth: You Don’t Need A Real Estate Agent To Buy A Home. This is true, so it can’t be a myth. I’m extremely biased. I think you should use a professional real estate agent for buying and selling your home. If I were selling my own home, I would use myself, but technically that would be a real estate agent. Can you get fleeced if you use an agent? Of course…but getting fleeced is not unique to having an agent either. Ask yourself if you want to deal with all of the garbage that a real estate agent will be going through on your behalf and if you think you want to, go for it.
- Myth: Buying a new home means fewer repairs in the years to come So on this one, it’s a bit subjective. How many years are we talking about before repairs are made? I saw a study once that said that at year 18 of a new home everything pretty much needs to be replaced, HVAC, Roof, remodeling. Can that happen sooner? Of course. I think this one just depends on what you want to believe. New home buyers that I am aware of spend $$ on improvements to their home the minute they move in, which isn’t a repair but it’s also not expense free.
- Myth: You’ll Need a 20% Down Payment Plus Closing Costs
This is a myth that I keep seeing, but to be honest, I haven’t seen someone go with 20% down in a long time. Usually I see 95% LTV loans, sometimes as high as 97% and I know of a few places where someone can be at 100%. I think the issue here is the question of PMI, but that is also something that depends on the type of loan. - Myth: A Down Payment Is the Only Upfront Cost
Definitely a myth. Lots of costs upfront on the purchase of a new home. Appraisals, Inspections, Surveys, all occur before you actually close on the house. I always mention this to my buyers when we start getting serious about making offers to make sure they have enough cash to be able to pay these upfront costs. - Myth: Getting Preapproved Will Hurt Your Credit
I don’t really understand this one. If your credit will be hurt so much by a preapproval for a mortgage, you have bigger issues than getting a preapproval. I can certainly see this as an excuse not to get a preapproval, but it just shows the agent that you aren’t serious about buying a home and that they would be better off spending time with clients who are. - Myth: There’s Plenty of Time for Preapproval When You Find the Right House
This is a myth, and it’s not a good idea. Let’s say you’ve found the right house on a Sunday afternoon at 2 and offers are due by 5. You write an offer with no pre-approval, and the 12 other offers do have a pre-approval included with their offer. Are the sellers going to take you seriously? No When you do this, you are basically sacrificing the house you want to make an offer on now for one down the road that you will have gotten a preapproval for. - Myth: You Should Never Offer Full Price
This is a fascinating myth because it depends on the market. If your parents tell you that you shouldn’t offer full price, that is from 20 years ago when there weren’t multiple offers seemingly on every home. If you have multiple offers, what are the odds that they would all be below asking? Not very high. You are basically wasting everyone’s time when you write an offer below asking in a multiple offer situation. Now, if you aren’t in that situation, why would you offer full asking price? Doesn’t make any sense. But the negotiating stance is based on the individual home, not just some blanket myth. - Myth: Buying a Condo Is Just Like Buying a Home
I don’t think it is. For one, there are more rules typically with a condo purchase. Another thing is that you do end up sacrificing some privacy when living with others. All of a sudden noise is an issue. If myth is based solely on the process of buying, then it is definitely very similar. Depends on the way you look at it, I guess. - Myth: Avoid Buying a First-Floor Condo I have never heard of this myth. Perhaps it’s based on regional construction patterns. I have many older folks who are always looking for first floor condos because they want to be able to avoid steps wherever possible. I guess if you had an elevator that wouldn’t be an issue.
- Myth: Schools Don’t Matter If You Don’t Have Kids
I do think this is a myth. A strong school district will help keep your property values stable. Can you find homes cheaper in areas where school districts are bad? Of course. And, this is highly dependent on where you live as well. In St. Louis, the City school is separate from school districts in the county. There are plenty of expensive homes in the city school district as they are in the county. So, perhaps it should be explained that strong schools are one component of many to consider when looking to buy a home in a particular area. - Myth: Buying Is Always a Better Financial Deal Than Renting
A myth because of the way the myth is written. Buying is not ALWAYS a better financial deal than renting. It totally depends on your situation. There are many homebuyers that would be better off as renters because they can’t seem to take care of a home on their own. - Myth: Single-Family Homes Are More Affordable Than Multi-Family Dwellings
This is a tricky one. The argument is that if you lived in a duplex, for example, it might cost more at the time of purchase but the ongoing costs would be lower because there are tenants to share in the mortgage payment. If you choose to look at it that way, the only way to truly compare would be to look at the premium paid for the duplex and then what a comparable single family home would cost and make a determination. Even then, it’s a question of preference. Do you want to be a landlord? - Myth: You Must Sell Your Current Home Before Buying a New One So this is obviously a myth. But, I do often tell my sellers that, especially in this market, you need to purchase something or have a place to go if you do decide to sell before you buy. I think, in this market, it would be irresponsible to tell someone that it’s ok to sell before buying because it can take months to actually get a home under contract without seriously overpaying.
- Myth: Your Preapproval Amount Will Be the Loan Amount You’re Approved For So that’s a myth. It could be true. Many buyers I know often will be pre-approved for less than what they could afford because they are more interested in setting payments where they are comfortable. The preapproval is just the beginning of the financial puzzle when purchasing a home…it lays the groundwork for decisions made in the future.
Sources: https://finance.yahoo.com/news/common-real-estate-myths-know-215623449.html
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