10 Real Estate Myths

Posted January 1st, 2008 under myths and truths.

Myth: A home sold under Power of Sale is a guaranteed bargain

Truth: The bank is required to sell the home for the highest price the market will bear. (See my guide to Power of Sale for more information).

Myth: I can save money by buying a 'fixer-upper' and renovating

Truth: It often costs more to buy and renovate a home than it would to buy the same home already renovated. (See my article about Buying a 'Handyman Special' for more information).

Myth: I can save money by buying a home outside the city and commuting to work.

Truth: The cost of maintaining a car and driving it into the city is more than any savings gained by buying in the country. (For a detailed comparison of the costs of commuting or living in the city, see my article The Cost of Commuting).

Myth: I know somebody whose home sold for 105% of its value!

Truth: A home may sell for 105% of its initial asking price, but this does not mean that it sold for a higher price than its true market value. Consider: if a home is underpriced, the number of interested buyers will be exaggerated, and a 'bidding war' may ensue. Once the bids climb to the actual market value, the bargain-hunters will bail out. Though it may feel as if something exciting has happened, the home has only just reached its true value. Consider also: any potential buyer likely has an agent, who will tell them exactly what a home is truly worth. Though homes do, at times, sell for more than market value, it is usually because the buyer was in love with the particular home, or needed a home as soon as possible. (Neither factor has anything to do with a 'bidding war' or underpricing).

Myth: I know somebody whose home sold in less than 48 hours!

Truth: This myth is similar to the one above. Any home can sell very quickly, if it's priced below market value. In some cases, a home sells quickly because there is a buyer who has been scanning the listings, waiting for this particular kind of home. This type of buyer is ready at a moment's notice and can buy immediatley. However, most of the time, a sale within 48 hours is an indication that the seller did not receive their best possible value.

Myth: I have a firm deal, so I don't have to keep my home clean or in proper repair any more.

Truth: If you fail to keep your home in proper repair, the buyer can demand that you repair the damage before closing, or that the cost of any necessary repairs be deducted from the sale price of the home. If you refuse, they can sue for damages.

Myth: If I default on my mortgage, I can hand the keys to the bank and walk away.

Truth: Every person whose name is on the loan is personally liable for the full amount. If you are in a power-of-sale situation, do not expect to hand over the keys and be done! For more information, see my guide to Power of Sale.

Myth: I'm going to sell my home privately and save the commission.

Truth: Often, because the buyer knows you aren't paying commission, they will expect a price slightly below market value. Private sales tend to attract bargain hunters, and have been shown to sell for lower prices on average than sales involving an agent. In addition, you will be committing yourself to a considerable amount of work, and will need a lawyer to have contracts written up or checked to make sure they are legally sound.

Myth: I'm going to renovate/redecorate my home before listing, so I can ask for a higher price!

Truth: Most renovations do not return their full cost when the home is sold. (This includes redecorating). To boost your 'sellability', make sure your home is clean, organised, and in good repair. For more information, see my guide to The Value of Renovations or my guide to Having a Successful Showing.

Myth: A market evaluation is how much a realtor thinks they 'can get' for my home.

Truth: A proper market evaluation is an estimate of the actual value of your home under current market conditions. It includes a comparison with properties in your area having similar features, and which have sold in the recent past. A high evaluation may be gratifying for your ego, but can lead to disappointment down the road when the 'promised' value is not realized.

Wondering whether something you've heard is a myth or the truth? Just ask me, I'll be happy to help.