Let’s face it — the real estate business is riddled with rumors and myths that can steer the uninformed buyer or seller in the wrong direction. In a market unique like the District’s, it is important to separate fact from fiction. Here are a couple of myths often misunderstood by both buyers and sellers:
Seller’s Myth: List your home above the price at which you expect to sell it.
Reality: This myth is simply false. Most of D.C.’s home sales are at or above 95 percent of the listed value. Properties that sell for substantially less than their listed price are rarely heard of in the area, and in some neighborhoods, the sale-to-list price ratio can easily go over 100 percent. Instead of pricing above the market, sellers should set the bar at the median. As a rule of thumb, you can never under-price a home.
Buyer’s myth: You can save money without using a real estate agent to purchase a home.
Reality: Traditionally, the seller pays the commission in any real estate transaction. In the District, real estate agents represent the client through agency. While representing both parties is legal (known as dual agency) in D.C., the majority of transactions include two agents and two clients (a buyer and a seller). When a buyer goes unrepresented, the seller’s commission may be paid to the listing agent, not saving the seller money due to a buyer not seeking representation. Instead, buyers should seek agency from a real estate professional. While there may be a small administrative fee of a couple hundred dollars, the return on being represented may help the buyer navigate the market even better.
Seller’s myth: Open houses will ultimately sell your property.
Reality: As times have changed and technology continues to evolve in the real estate marketplace, sellers are finding new ways to find purchasers. Open houses allow the listing agent or a buyer’s agent to find clients, but rarely does this lead to a seller finding the purchaser on their listing. Sure, open houses are a good way to test the interest in a property, but a good marketing of a home should include many different spinning plates that include open houses, mailing campaigns, and other strategies to get it sold.
Buyer’s myth: A 30-year fixed loan is the best lending option available to you.
Reality: Financing your purchase is likely the biggest choice you will make throughout your purchase. While a 30-year loan is by far the most popular choice, most purchasers will move and sell the home before the culmination of their loan period. For a buyer who may only own a property for 5-7 years, other loan options may be more beneficial such as an adjustable rate mortgage or a 15-year fixed loan.
Seller’s myth: You have to renovate before selling your home.
Reality: For most properties that have been maintained well, large-scale renovations are not needed prior to sale. Many sellers invest thousands of dollars on renovations where the rate of return may be significantly lower, and in return, their home may sit on the market at a higher price to recuperate the costs of renovation. Instead, if your home is well maintained, consider smaller fixes or beautification techniques that will really showcase your property such as painting, planting and staging your home for sale.
Buyer’s myth: You must have 20 percent down payment to purchase.
Reality: This one is a no brainer; 20 percent down payments are not required to finance your home. For many buyers (especially first-timers), a 20 percent down payment is very difficult. The good news is that many lenders have loan products specific to buyers who do not want to put 20 percent down. Sure, private mortgage insurance is definitely a concern when putting less than 20 percent down on a home, but there are ways of working this into your interest rate as well.
In buying and selling real estate, it is important to separate fact from fiction. The process of buying a home can be ambiguous, and it is important to know the facts before making one of the biggest decisions of your life.
Tim Savoy is a real estate agent with Coldwell Banker Residential Brokerage, Dupont Circle. Reach him at 202-400-0534 or firstname.lastname@example.org.