4 Real Estate Myths Busted
4 Real Estate Myths Busted
Many people watch the on-screen drama of real estate-related reality shows. It’s fun to watch other people search for and remodel homes and see million dollar properties. However, some things you see on shows and sometimes things you hear are not the full picture. Check out these top real estate myths:
Myth #1: You need to have at least 20% downpayment to buy a house
This may have been true at one time, but if you are purchasing a home for your personal residence, there are many loan products out there that do not require a 20% down payment. Down payments can be as low as zero down and 3-5% down is common, depending on the loan type. Speak with your preferred lender about different loan options with lower down payments to see which loan works best for your financial situation.
Myth #2: Most buyers look at 3 houses and then pick one
This myth is definitely straight from the home buying shows and is usually not accurate. Most home shoppers look at between 4-8 houses before making a decision. Some buyers may look at only 2 houses, some see 20, but most tour more than 3. Keep in mind on the show, they only have so many minutes per episode, so they can’t show all the houses they really looked at! In reality, whether it is the 1st house or the 8th house, you’ll know it’s “the one” when you see it.
Myth #3: All Buyers want a fixer-upper type project!
This myth is a more recent phenomenon, but it is a situation where the exact opposite is true. Most buyers just want to move in and not have to do anything. Not to say that these buyers are a complete myth and don’t exist—they do, but are certainly not the norm. Moving is very stressful without the additional worry of a remodel, which is why a “project” house will typically take longer to sell than a move-in ready house. There is a market for rehab buyers, but it is a much smaller group of buyers than the shows portray.
Myth #4: House flipping is easy money
It is true that flipping houses can be a lucrative business…if you know how to do it. It’s not as easy or as fast as it seems on the outside looking in. An investor can spend weeks or months finding the right house—after all, if you aren’t making money on the buy, then you’ll never make money on the flip. Once the property is purchased, then the rehab work begins, along with the surprise costs. Seminars and shows show profit summaries that leave out huge expenses from their “net profit” numbers. For instance, when showcasing the flip’s profit, they may summarize it like this: Original Purchase Price =$60k; Rehab Costs=$50k; Sales Price= $150k; Total Profit=$40k!! So when in the audience, we are thinking they made $40k and it sold in 45 days—they are genius, right?! Well, if only it were that simple. Significant costs are left out of this simplistic net profit breakdown, such as taxes, insurance, utilities, maintenance, commissions and closing costs—lets say they total to roughly $13k. So the true net profit is more like $27k before taxes. Don’t get me wrong, that is still a great payoff, but far different from exaggerated profit which doesn’t account for all the expenses.
These are only a few of the rumors, assumptions and myths that surround real estate. Sometimes there is some truth in a myth, but for many they are completely inaccurate. Be sure that you know the true story and not just a myth when buying or selling.
Lisa E. Priest loves myth bustin’ and is an East Texas Area REALTOR® with Picket Fence Realty, Inc. You can reach her via phone or text at 903-948-3343 or at BuyPalestine.com