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Business :: Real Estate :: Hawaii Home Help :: Eight Home Buying Myths

Eight Home Buying Myths

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And What You Really Need To Know Before You Buy

There is a big gap between perception and reality in matters of real estate.  Newspaper headlines are just one of the sources of confusion. Buyers and sellers are also barraged with well-meaning  information from family, friends, and co-workers that presents a distorted or inaccurate view. This is often based on hearsay or very limited information and partial understanding. Now that market conditions have changed, it is more important than ever to arm yourself with accurate information and to separate opinion from fact.  Then you will be able to make the best possible choices in buying, selling, or renting.

computer shopping

Myth #1: I can use the internet to view all of the homes for sale, so I don't really need a Realtor to help me find the right home.

The internet is a great resource for home buyers, and statistics show that about 70% of all buyers browse for homes online before contacting an agent. What many homebuyers don't realize is that the information available to the public on the internet is both incomplete and out of date by the time it hits most of the publicly accessible sites. Here are some examples:

  • Properties take several days to show up in most real estate company web sites
  • Many companies feature their own listings over those listed by the competition
  • Properties that already have an accepted offer are mixed in with those that are fully available
  • Crucial home features may not be displayed - such as leasehold homes and high association fees
  • To sort through the choices you need to already be familiar with the neighborhood names, zip codes, and main streets
  • Photos of houses will show the best features, and eliminate the undesirable ones. If there is no photo of the kitchen or the front of the house, for example, ask yourself why
  • If a home sounds too good to be true, it is!

It's great to use the internet for casual viewing but don't presume that you will be able to select the best home to buy without detailed knowledge  of the community, sales history in the area, and all the details about the home that may not be available online. Realtors view the available homes in their market area, and can best select the ones that are right for you without wasting your time.

Myth #2: The perfect home will turn up at the right time. If I wait long enough, it will fall right into my lap.

Perfect Home

Here is a great example of how perfectionism applied to real estate is...impossible. There are no perfect homes. Even brand new homes have defects, and older homes have history that often includes major repairs, land settling, plumbing problems, leaking roofs, and noisy neighbors - you name it.

A more productive viewpoint is to seek a perfectly acceptable home, which means there are going to be a few quirks that you can live with or repair. Homes, like people, are not flawless but we love them and enjoy living with them in spite of their imperfections. That said, a good Buyers Agent will help you identify the major issues that are legitimate deal-breakers, and will support you if you want to back out of a deal that is not right for you. It's all about keeping perspective and separating the Big Picture from the irritating but correctable details.

Myth #3: Once you find the home you want to buy, it makes no difference what real estate agent helps you.

agents bouncing

Unfortunately, buyers are more likely to shop for homes rather than shop for an agent who will best represent them in their purchase. But Realtors who represent buyers have a wide range of skills and experience, or lack thereof. Did you know that 40% of all Realtors are relatively new in the business, and in this slow market, over half of all agents have not had a single sale this year? Think about it - would you like to be operated on by an inexperienced surgeon?  Or have just anyone tell you how much income tax to pay? Some buyers go one step lower, and allow the listing agent to "write up the offer", regardless of that person's skill, ethics, or experience. They may be under the misconception that if they use the agent who comes along with the house they will have a "package deal" advantage in getting the best price. The reverse is actually true. The listing agent has a prior fiduciary relationship with the seller, who is paying their own agent to get them the highest price. In this situation, you are in "dual agency" and you are on your own with negotiations.

Smart buyers speak to several pre-screened agents to find one with the experience, qualifications, and "heart" to work hard on their own client's behalf, as well as to guide the entire process from start to finish. An Accredited Buyers Representative (ABR) is one sign of a Realtor who has studied the highest level of service to buyers, including negotiations, financing, and closing the deal with the buyer's interests put first.

Myth #4: No need to limit myself to just one agent. The more agents helping me find my home, the better.

 "I'll work with the agent who finds the right property for me" does not really make sense with you think it through. Here's why:

First, all the homes available to purchase are in the same data base for all Realtors to access. You will waste your own and their time looking at the same homes with several Realtors.

Second, experienced buyer's agents will want you to sign an Exclusive Representation Agreement to establish your relationship and their role in assisting you. Only agents with no knowledge and no other clients are likely to agree to work on a non-exclusive arrangement.

Third, it costs you nothing to exercise your right to select the best qualified agent of your choice, to buy any home you want. With your committment, your agent will be motivated to beat the bushes for your best property, even if it is not listed.

crazy paperwork pile

Myth #5: Buying a home should be a simple matter, so no need to read all the fine print.

Home buying is increasingly complex because properties are complicated, people's expectations differ, and neither will easily reveal their true natures. Buying or selling a home is a detailed legal matter involving enormous sums of money. For this reason, all real estate contracts must be in writing. Errors in the process or botched sales may bring attorneys out like rats from the proverbial sinking ship. Practices differ from state to state, and they change constantly as do the laws controlling them. So until you have sold dozens of homes in the state, you have probably seen only the tip of the home-buying iceberg which you can run into when the weather turns foul! Never rush into signing a contract you have not read. Prior to signing, ask your attorney or Realtor to explain the terms to you if you. If you have no questions, you probably have not read it!

Myth #6: If I buy directly from the seller I will avoid the hassles and get a better deal.

crazy mad man

Since about 95% of homes are listed with a Realtor (see Myth #3 above), you will be severely limiting your home choices. How are your negotiation skills? Let's say you are an attorney (I take back that comment above about rats) and can handle the purchase negotiations, contract and paperwork. Do you know what questions to ask the sellers? Will you be able to obtain and interpret the complete, unbiased history of the home? Are you sure that the neighborhood is right for you? How will you respond to issues that may arise with inspections, surveys, encroachments, disclosures, covenants, etc? Every sale has a few bumps in the road - will your wheels fall off?

Remember that the seller normally pays for the buyer's real estate representation, so it is unlikely that you will benefit from forgoing your own expert real estate assistance.

Myth #7: If I buy a foreclosure, I can get a great house for less money.

Foreclosures are often distressed properties, and the process of purchasing a foreclosure is not a consumer-friendly one. It is recommended only for very experienced buyers and investors who do not need a security net. Here's why:

 If you decide to bid on a foreclosed home, you will need to have nerves of steel. You'll be standing on the courthouse steps with a cashier's check in hand for 10% of your highest offer price you are willing to pay. Expect to be bidding against experienced and well-financed investors along with the bank who has the mortgage on the property. (In most cases, the bank's offer will be the winning bid). But if your bid is the highest, you will not normally be allowed any contingencies, such as inspections, disclosures, or financing, so if you change your mind later, you can kiss your deposit goodbye. Still, the process is not done. You have to wait until the court confirmation hearing, at which time someone else can come along and outbid you at the last moment.

money house

Many banks know this, so they list their foreclosed properties with a qualified Realtor after they take possession through the bidding process explained above. At this point, it is easier for the consumer to purchase through a Buyer's Agent and benefit from the usual protections a buyer can expect when they purchase a "even a bank-owned property", or "REO".

Myth #8: It's almost impossible to get a mortgage nowadays.

Actually, qualified buyers have a choice of mortgage programs. The mortgage crisis of 2007 eliminated programs which were designed to provide financing for marginal buyers, buyers with unverified income, bad credit, zero down payment, and other credit issues.

paperwork

Now there are several attractive new federal and state Mortgage Interest Credit programs, First-Time Buyer programs, and other incentives to buy now, which can result in savings of up to $500 per month.  Qualified buyers with excellent credit and cash reserves have the most choices including some no and low down payment programs. Yes, there will be paperwork - lots of that! But interest rates are still great, making right now a better time to buy than you might think.

Great opportunities exist right now for those who have the insight to see them, and the ability to act. But if you like to run with the herd, you will find yourself buying a home when the next frantic rising market creates a wave that pushes prices higher once again. Since everyone else will also be buying, it must be  good idea, right?

Some people find comfort in this sort of market, but they are not the ones who will get the best price. Others are waiting for the  bottom to fall out- but how will you know when we are at the bottom of the market? You will know only when prices start rising again. Of course, then it will be too late. For details on your own neighborhood market conditions, just email me at mailto:stephanieg@remax.net or check out my web site, http://hawaiihomehelp.com/ with lots of information for buyers, sellers, and anyone interested in Hawaii real estate.

sold family

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Comments

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cpa77 — Tuesday, April 14, 2009
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I wondered what you think about all these ad's saying 'take over lease payments'? I guess the idea is to come in and take over mortgage payments for someone who can no longer afford it. You save them from foreclosing and get a good deal on a house with equity. Is this viable? Seems too good to be true, but I know it does happen. Any advice on these types of sales?



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