Top 10 Real Estate Myths: Debunked

Putting at least 20% down on a home will increase your chances of getting approved for a mortgage at a decent rate, and will allow you to avoid mortgage insurance.

But you can put down less than 20%. The minimum down payment required for a house varies depending on the type of mortgage:

• FHA Loans which are backed by the Federal Housing Administration, require as little as 3.5% down.

• VA Loans guaranteed by the U.S. Department of Veterans Affairs, usually do not require a down payment. VA loans are for current and veteran military service members and eligible surviving spouses.

• USDA Loans, backed by the U.S. Department of Agriculture’s Rural Development Program, also have no down payment requirement. USDA loans are for rural and suburban home buyers who meet the program’s income limits and other requirements.

Down payment requirements can also vary by lender and the borrower’s credit history. The minimum down payment for an FHA loan is just 3.5% with a credit score of 580 or higher, for example, but the minimum is 10% with a credit score of 500 to 579.

       3. All you need is a downpayment.

Upfront costs are the costs you pay out of pocket once your offer on a home has been accepted. Upfront costs include earnest money, the inspection fee, and the appraisal fee.

• Earnest money: 1%–3% of the home sale price, typically paid once you reach mutual acceptance with the seller
• Inspection fee: typically $300–$500, paid during the inspection.
• Appraisal fee: typically $300–$500, paid after inspection and on or before closing.

      4. Save Money by Selling Your Home Yourself As A ‘For Sale by Owner’

Most home sellers decide FSBO isn’t worth it because it’s more of a hassle and you walk away with less money. Last year, less than 1 in 10 home sellers went the FSBO route and sold their homes at a median price that was 11% less than those who sold with a real estate agent.

For perspective, let’s pretend the same trend continues this year. If you could sell your house for $218,000 by doing FSBO, then an agent would probably be able to help you sell the same house for $242,000—meaning you’d earn $24,000 more by selling with an agent! Sure, you’d lose 6% of your total profit to agent commissions. But that still leaves you with nearly $10,000 more than what you would’ve gained by selling your home the FSBO route.

Bottom line: Selling a house by yourself instead of using an agent usually means missing out on tens of thousands of dollars in profit—don’t do it!

    5. Zillow is always right – Zestimate Myth

When was the last time Zillow physically walked through a property, pulled a relevant comparable, did specific adjustments and established an on-point range of value?

Zillow’s Zestimate gives a consumer a general idea of the value of a home — the company calls it a “starting point” — but by no means is it an exact valuation tool. Zillow can’t discern the difference between why homes on one street or in a particular area may be different value-wise versus those just two streets over.

As any experienced Realtor can tell you, emotional influence is how we buy and sell homes. Fall in love with a great house that you “have to have,” and it’s harder to make logical financial decisions when it comes time to bid. Similarly, if you believe the Zestimate to be more or less accurate – only to have a professional appraisal indicate your home is worth far less – you may struggle to feel good about the selling process.

Confirmation bias also means that people are more inclined to believe data that backs their beliefs – and it’s well-known in the real estate industry that people often believe their homes are worth more than they actually are. Even if you know there’s a possibility that the Zestimate has overestimated your home by thousands of dollars, because it matches your belief about your home, it can unduly influence you to treat the Zestimate as “accurate.”

You may even overprice your home with the hopes of obtaining the Zestimate number, and fall into the trap of having fewer interested buyers – which means staying on the market longer, and eventually having to discount the price.

Talk to an experienced local agent (me) 😉  who can view your home and give you a knowledgeable and more precise estimate of what your home is worth.

Questions for Future Homesellers