by Dan Krell ©2012
Debunking common real estate myths.
As a real estate agent, I often encounter people who talk about common and persistent real estate myths. In recent years, these few seem to be among the top myths:
Myth #1: “If you wait until the market bottoms out, you’ll get the best deal”
Counter point: “People trying to time the market may find in hindsight that they will have reacted either too soon or too late.”
Anderson & Harris, in their reveling study Timing the market: You don’t have to be perfect (Real Estate Issues 35, (3) (10): 42-42-50) indicated that you don’t have to be perfect when timing your purchase and sale of a home. They suggested that you could do just as well to aim your sale during market peaks and your purchase during market lows; however, they conceded that you would most likely know in hindsight when the market is at a peak or low.
Their results demonstrated that the typical “buy and hold strategy” over a thirty year period results in an annualized return of 8.18%; however, buying when a recession has ended with a predetermined sale period yields a wide range of return that ranged from 13.38% to 1.42% annualized total return.
Myth #2: “Buying a distressed home will result in a good purchase.”
Counter point: “There is inherent risk when purchasing distressed homes.”
There is inherent risk when purchasing distressed homes, regardless if they are foreclosures, bank owned homes, or even short sales. Although short sales are often occupied, foreclosures and bank owned homes are often vacant for many months; these homes are often sold “as-is; where is” meaning you are purchasing the home regardless of the condition of the home.
Besides the purchase and anticipated fix up costs, unanticipated repairs and expenses are often encountered. However without risk, there is no reward; due diligence, conducting inspections, and hiring the proper representation may reduce the risk and make your purchase a positive experience.
Myth #3: “The ‘big name’ agent with the most home buyers will sell my home quickest and for top dollar.”
Counter point: “Home buyers typically search for homes by characteristics and location, rather than searching for homes sold by individual agents or brokers.”
I have never had a home buyer tell me they want to see (or buy) a home because it is listed by a particular agent or broker. Rather, home buyers typically search homes by price, physical characteristics, amenities, and/or location. Home buyers will view your home if it matches their search criteria, regardless of who listed your home.
When interviewing listing agents, look beyond the sales pitch to list your home, and ask for real data and sources to back up claims. Agents will often not discuss the homes they could not sell; asking about the homes that did not sell as well as the reasons behind the non-sale may be more revealing than flatly accepting claims made by the agent. Asking for references of satisfied clients of homes that sold as well as homes that did not sell is useful to not only get a recommendation, but also understand how the agent conducts business. Ultimately, your home purchase or sale falls upon the experience and skill of the agent you hire.
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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 23 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.