Hello folks! 2 weeks ago we discussed some common buyer misconceptions such as renting vs buying costs, prequalification vs preapproval, big box banks vs local lenders, downpayment percentages, buyer agent commissions, and listing vs buyers agents. If you did not catch that one, please go back in our blog section and check it out! Here are a few more common misconceptions buyers sometimes have. We aim to arm you with the most knowledge possible so you can make the right decisions for YOU when considering one of the biggest purchases of your life – buying your home.
Misconception #7: The List Price Is The House Price
- The list price is just the price the seller would like to achieve for their home, there is always room for negotiations unless specifically told otherwise (and even then exceptions can sometimes be made if the other terms of an offer are exceptional).
Misconception #8: You Can Lowball Your Offer
- We are currently experiencing a very strong seller’s market (and have been for several years). Gone are the days during the recession where you can get homes for way under list price. These days homes that are priced appropriately are going fast and often with multiple offers. Even homes that are over priced usually get reduced to fair market value and then sell around there since we have such a healthy market at this time.
Misconception #9: Don’t Have Multiple Lenders Check Your Credit – It will Hurt Your Score
- According to the CFPB (Consumer Financial Protection Bureau) consumerfinance.gov, multiple credit checks from mortgage lenders are shown as 1 inquiry on your credit if it is within 45 days. Creditors realize that you are probably only going to take on the 1 debt (buy 1 home, not multiple so it is treated as 1 inquiry in a certain time frame). The effect on your credit score is the same regardless of how many lenders you check out. There is a slight negative effect but it is minimal and necessary in order to obtain a mortgage and compare lenders. You can shop around and get multiple estimate or preapprovals without fear!
Misconception #10: You Only Need Enough Money For A Down Payment
- Any buyer knows that they need to have enough money in savings for a down payment for their loan (this could be as little as 1%, 3.5% or even 5% in a lot of cases). However, what some buyers may not realize is that there are other up front costs involved. Closing costs are a big part of buying a home, and usually hover around 3%-4% of purchase price (that is on top of the down payment). If you do not have these funds, you can try to negotiate the seller to pay them as part of your offer. There is also the cost of the appraisal (usually around $500) and home inspection(s) (usually around $300-$500) – these are due by buyer at time services are rendered during the course of the contract prior to closing. You should also take into account if you have to pay anything extra at closing like the flood insurance, elevation certificate, land survey, homeowner association estoppel or transfer fee, etc. Make sure to factor in any moving costs or near future repair costs as well if applicable.
Misconception #11: Price Is The Only Part Of An Offer (Or The Most Important Part)
- We have all had buyers tell us to offer a seller a certain price and see if they will bite.What some buyers do not realize is that an offer consists of so many other terms and really needs to be in written form along with a preapproval letter to be taken seriously by a seller. Some (but not all) of the other important terms include closing date, financing or cash, financing terms, inspection period length, closing cost requests if applicable, loan commitment deadline, earnest money deposit amount, appraisal contingency, home sale contingency, etc. We have seen sellers take lower priced offers with other better terms.
Misconception #12: The Zestimate Price Is Accurate
- Agents have seen the Zillow Zestimate be spot on and also be $50k off! Zillow has algorithms in place but it can’t take into consideration everything a human REALTOR® can.It can compare properties that really don’t have much comparison to the one you are considering and isn’t aware of all the upgrades that are made in a home, so it is always best to ask for a professional CMA (Comparative Market Analysis) from your REALTOR®. All of our agents offer free ones if you are considering buying or selling.
Misconception #13: The Zillow Loan Estimate Is Accurate – It Is So Low!
- This is a huge one to watch out for – the Zillow Loan Estimate is only taking into consideration the monthly principal and interest charges of your loan! It is not factoring in anything else – monthly mortgage payments also consist of escrowed taxes and homeowner/flood insurances. This can increase your monthly payment sometimes even by 1/3, of course if it different in every situation.