Dear Monty, you write a lot about the myths and misinformation in real estate. Do you have a “Top 10” kind of thing for that stuff? – Jason S. Chicago, ILL
Thanks for asking. It is an insightful question. Here is a list of the “10 Most Encountered Real Estate Myths”. These “myths” are not listed in any particular order. A typical consumer would not encounter all of these (and may not experience any of them) in a transaction. There are other “myths” that could be substituted for the list above. This list could have many different entries. Some of these may shock or surprise you, so I have included some general comments about each myth.
1. “Open Houses” are a waste of time.
If you get this answer from an agent, it could have many meanings. It could mean they are not confident in your chances for selling and they do not want to invest time in it. It could mean they have so much inventory they cannot physically squeeze the home into open house rotation. It may also just mean they do not work on weekends.
The fact is an “open house” is an excellent tactic to gain exposure for the home. It provides prospects a truly casual, non-obligatory chance to preview the home. While it is true your agent may pick up new prospects for homes besides your home, conversely, an open home somewhere else in the area may produce the ultimate buyer for your home in that same fashion. Good agents can be very creative and skilled in insuring the open house is promoted and take steps to insure prospects attend.
2. Experienced agents are always the best agents.
While longevity in this business can be an indicator the agent is competent and honest, it is not necessarily so. What is essential for home buyers and sellers is honesty, initiative, listening and negotiating skills, availability and a clear understanding of the best and most efficient methods to serve up your expectations. This is one of the reasons the interview questions you learn to ask in DearMonty.com help you to choose wisely. The quality of their responses, sincerity and general attitude is far more valuable than the duration of their career.
3. Using a “Selling Agent Bonus” is a legitimate marketing tactic.
This one is a classic. It is certainly a great tactic for the agent. It is not an appropriate tactic for anyone else in the transaction. Why would an agent not bring a prospect to your home if it fit the requirements they are seeking? A motivated seller would find a far better strategy is to reduce the price of the home to sell the home quickly. Most home buyers would much rather see the “bonus” come to them in the form of a reduced price than paid to the agent for introducing them to the property.
4. Going “For Sale By Owner” saves you money.
A home buyer has choices on how to go about seeking a home. One choice is to find an agent who understands their requirements and takes them on a tour of the homes that are of most interest. They can also jump in their own car, buy a newspaper or search sites on the internet and go out on their own. Why would a buyer do that? The most likely explanation is that they believe if they do the work, they can save the commission. A seller that chooses the “go it alone” route is trying to do exactly the same thing. They both cannot save the commission.
If both parties could just split the fee, all would be acceptable, right? In theory, the seller can only gain if they retain the commission they are doing the work to save. The buyer can only gain if they obtain the home for less than market price. The great majority of us are not trained to engage in this negotiation and successfully close the transaction knowing we saved money. Both of these parties are missing the bulk of the market and the best selection. It is logical to reason home buyers and sellers utilizing agents have better odds of achieving their goals.
Consumers who consider the for sale by owner route may look hard at invested that same time commitment in learning how to evaluate a home, how to interview and choose a good agent and how to proceed through the real estate buying or selling process with a solid game plan. That way, they stand a better chance of protecting their hard earned capital.
5. Every home has a specific value.
The fact is no home has a specific value or price. When most homes go under contract, a contingency to allow the buyer to obtain financing is in place. Often, these homes come back on the market weeks or months later when financing could not be found. When the home sells again to a different buyer, it is extremely rare that the second sale price is the same price as the first sale price. It is always higher, or lower, and sometimes by significant amounts. Find more information on the subject of value at “Valuing A Home When Buying Or Selling It” elsewhere on this web site.
6. Top producers are always the best agents.
The real estate industry is full of top producers. Agents battle to be a top producer for income, prestige, ego and recognition. This is the American way. There are many methods utilized to be able to claim one is a top producer. Some agents are top producers because they are highly skilled at picking prospects which are the most likely to act decisively. Some agents specialize in a very narrow market. The waterfront specialist, the luxury home specialist, the income property specialist. Some agents are just extremely proficient at convincing prospects to work with them. Some agents choose to only list homes. They do not work with buyers. Others will only work with buyers. Unfortunately, there are agents that are so focused on being successful they will do, well, almost anything to get there. There are agents who are capable, but like to take shortcuts. Agents who speak well, but are lazy. Or sometimes, just not able to make sound decisions regularly. These options and angles the agents work may not be beneficial for you.
These same issues are contended with by every industry, business and profession in America. You may even recognize someone I describe above where you work now. You are best served by investing time and energy in choosing the agent that best serves your needs and circumstances. We sometimes take this decision to lightly. There are many capable real estate agents practicing and working hard to perform at 100% ever day. It is a tall order to do the entire job well. Taking the time to determine which agent to choose requires effort on your part and should pay dividends when meeting your real estate goals.
7. Submitting the first offer creates a negotiating priority.
The home seller is under no legal obligation to react first to the initial offer to reach them. The seller could set the initial offer aside and deal with the third offer to reach them. It is quite common for both buyers and seller not to be aware of this fact. Only in multiple offer transactions does this potential for misunderstanding arise, perhaps that is why agents may not typically think to discuss it. If a buyer believes this to be true, and the seller chooses to deal with a different proposal first, the first buyer could feel they were treated unfairly. This is a compelling reason to review the “Rules of the Real Estate Game” to make yourself aware of the possibilities.
8. Always have a “cushion” when pricing or negotiating.
The decision to create what may be considered insurance or a “cushion” in your negotiating stance can be extremely difficult to make. In some cases negotiating in that manner may cause you to lose the home you want. The best method to utilize in making a decision regarding a “cushion” is to understand three items; the sub-market in which the home is located, both parties circumstances and, most importantly, what you believe the range of value of the home is.
9. All agents are trained to evaluate homes.
In Wisconsin, the pre -license training required to gain a license includes only 4 hours of training on how to evaluate a home. In Wisconsin, home evaluation is not a covered subject in continuing education classes(18 hours every 2 years). Do real estate brokers train their agents properly in establishing a home’s value? While I know some do, my belief is that many do not. The way most agents learn to evaluate homes is by watching other more established agents and “aping” those methods or using prepackaged MLS software, which is often over-simplistic or does not take fundamentals into consideration.
10. Buyers should always use a “buyer agent”.
There is no independent source a potential buyer can utilize to determine whether or not the buyer is better served with a buyer agent. A buyer can determine the value of utilizing an exclusive buyer agent by taking a three step approach.
Step 1. Listen to the agent”s presentation.
Step 2. Ask the agent the same questions presented in the “Choosing a Real Estate Agent” article elsewhere on this web site.
Step 3. Interview multiple agents before making a decision on which one, if any, to work with.
A good real estate agent should be able to provide service to a buyer under buyer agency, dual agency and as sub-agents of the seller. That is the law. For more information, read the article entitled “Is Your Real Estate Agent A Secret Agent”.
Jason, I hope this answers your question and offers some enlightenment. Thank you again for asking.