:: Myths in Real Estate ::
The business of selling/releasing & buying/acquiring real estate or property has been apart of our society for all time. Either by way of force, favor, deal or deception it has been the foundation of power, wealth, security & stability of mankind.
Today we have a controlled “Certificate of Title System” that is unique to Australia but more simplified here in WA. Leading the way for an effective process or procedure of property ownership.
However, there are many myths, legends, folktales that still exist in the real world of estate.
Due to the differences of the eastern states property laws & transactions, couple this with international dealers plus a long list of different situations & circumstances that can happen prior, during & post purchase of property. This is a very interesting subject of MYTH BUSTING.
Because the list is so long we will pick some interesting ones for the sake of this feature.
However if you have a question or a personal situation in question please feel free to call us on 0413122633
& we may be of assistance.
So lets dive in & have a look around the murky waters of mythology…
:: Myth: The first offer is your best offer…
:: Myth: Recent sales evidence & comparable sales data records are “recent”…
:: Myth: Local #1 agent are the best who has listed & sold the most accumulative sales in the suburb is actually the best seller of real estate…..
This achievement is based on total sales or turnover not highest individual sales. It is a “Prestige Method” of promoting awards by scoring & becoming an attraction agent through impressive numbers. In some cases the agent is competing with other industry members for time frame & sales outcome using every trick in the book to get the sale done. The industry only awards the “highest annual sales person” not the fairest & best, most competent, most complicated, innovation. Nor does the length or service, experience or seniority of service acknowledged. Sometimes it could be questioned was it the highest possible figure achieved for the property owner or is it just another deal for the personal records books.
:: Myth: My house is worth more than the one listed down the road for sale…
:: Myth: Makeovers help make make money for the seller…
:: Myth: Master or Grand Master is the best agent to have sell my property….
:: Myth: Material facts only have to be disclosed if the agents knows about them….
:: Myth: The seller’s disclosure statement is contractual…
:: Myth: The owner and the tenant can mutually agree to not worry about the RTA minimum security requirements..
:: Myth: Conflict is inevitable in a negotiation because it is Buyer versus Seller….
:: Myth: Good agents can command armies of buyers to fight for your home…
Even if the market is red hot in a particular suburb or area, don’t think that means every home going to market will attract a tsunami of desperate buyers. There is a bit of a myth out there that agents have all these buyers gathered in a field somewhere right now. Some sellers think all you have to do as vendor is list your home and the agent will release these buyers and they will all go at it hammer and tong to compete for your home … sorry to say, that one is completely untrue.
:: Myth: Never sell in the winter
We’ve all heard this old chestnut, that the only people who put their homes on the market when the weather is coldest are poor, desperate souls who will accept any price to pay for some firewood.
This it’s simply not true…Australia’s property market is proving active year-round. People buy anytime of the year & the buyers who do come out in bad weather & the rain are “voting with their feet”, they are qualified a real buyers.
So if you want to sell….get ready to brighten up your home this winter.
:: Myth: Beware of accidentally selling too low
I have been selling real estate for 11 years and would say nine out of 10 sellers have inflated views of the value of their own properties. One of the biggest myths is created by sellers concerned they will undersell their own properties. Owners get anxious about accepting an offer under the ‘perceived real worth’ of their home. What they don’t realise is that the offer on the table is from an individual that has been looking at comparable properties in a particular price range & is putting forward an real offer for consideration. It is probably within several thousand dollars to true market value. The buyers are the market & will eventually decide what the sale price will be at any given time, by way of offers, not the owner.
The reality is the owner is not buying the house, they are selling it…. however the irony is when an owner counter offer or buying the property back.
:: Myth: Property law is a complicated and terrifying beast
Agents and buyers signing papers
Some people are mortified about the legal side of transacting property. Yes, buying or selling a home does mean following a legally binding process. There are potentially costly penalties for those who do not.
However, it is not some big bad monster to be feared, Heppell says.
“Many people get very concerned about the legals of the deal but it is pretty simple really and the legal side of it doesn’t even come into it until you have a solicitor or legal representative for both sides sign-off on it and then it is a solicitor or conveyancer’s job to carry through the carriage of sale,” he says.
“It should be straight forward as long as there’s an expert overseeing this for you and that person is a good communicator.”
Understand it: What happens on settlement day?
:: Myth: An agent has a magic bag of tricks to sell a house
Agents have a limited range of things we can use to sell your home, things we can adjust, and all are controlled by the vendor. These are the ‘3 Ps’ of presenting it properly, pricing it properly and promoting it well and in a hot market these three things may not be the deal-breakers to securing a sale but at the end of the day, while we will make suggestions to the vendor – i.e. adjust the price or tidy up the home – it is always up to the seller to make the ultimate decisions. Presentation, pricing & promoting are the 3 P’s of real estate sales.
:: Myth: Young adults have no hope of home ownership…
This is simple Not true, young people buy their first homes every day.
This idea that it is ‘impossible’ for young people to get their first home is one of the biggest myths in property conversations around the bbq.
Young people getting their first, second, third-plus properties every day, showing grit and determination. More young buyers a more savvy than ever before, opting to do research on the digital platforms along with seeking professional advice. With generation X & Baby Bomber parents giving great advice in co-operation with an industry specialist. Wise finance tips plus understanding expectations and how to move towards long-term goals through smart forward planning to progress up the ladder.
:: Myth: Real Estate Agents are Always Late for Appointments
False. There is no excuse for habitual tardiness among professionals. None. I don’t care if it’s your doctor, your cable TV installer or your Realtor.
Every person deserves respect, and respect is earned by providing what is promised and being on time. If your agent has a god-like, self-deluded impression of her or his own importance, find another. The agents I know are on time. Clients who listen to agents’ excuses allow tardiness to happen. The agents I know are always prompt. Don’t let a few bad apples give the entire industry a perception it doesn’t deserve.
:: Myth: The More You Pay for a House, The More an Agent Makes
False. Ever hear a friend say this: “Every dime more you pay for that house makes the agent more money, so don’t trust that agent.” That’s a misunderstanding. The difference between $300,000 and $310,000 is about $150 to an agent. Do you really think the agent pays any attention to the commission difference of a $10,000 spread?
:: Myth: The Less Commission You Pay to Sell, The More you Make
False. Discount brokers like to propel this myth. They claim to save sellers money by charging less. The truth is agents who are top producers and excel in this business do not discount services. Why? Because they don’t have to.
Less-than-full-service agents can’t afford all the bells & whistles paid for by full-service agents, who tend to draw higher offers. It boils down to you get what you pay for. A 2% commission reduction doesn’t amount to much when your price is discounted 10% or more because your agent couldn’t afford full market exposure.
:: Myth: Agents Must Show You Homes On Demand
False. Unless you have a signed contract with an agent or that agent represents the seller, that agent you call doesn’t have to show you anything. You can’t call a local real estate office and demand service or demand to be shown homes, because agents don’t work for free.
If you aren’t planning on writing an offer with the agent you call, be upfront or don’t waste that agent’s time. But don’t expect that agent — who is likely to earn nothing — to be too excited about jumping in the car with you. That agent is not obligated to show you anything.
Nor is the listing agent obligated to show you a listing if you are represented by another Realtor without a request from that Realtor.
:: Myth: Agents Get Kickbacks from Lenders / Title / Inspectors
False. Since 1974, agents have been prevented from receiving any kind of kickback or favor from real estate vendors. It’s against the law. It’s against RESPA: the Real Estate Settlement Procedures Act. Some agents are slower than others to realize how the law affects them, but most have heard of RESPA and would not jeopardize their license, regardless of the temptation.
:: Myth: An Agent’s Home Inspector Will Always Favor the Agent
Any agent worth her salt wants disclosure. Why? Because she wants what is best for her client but also, and this is not to be taken lightly, because she does not want to be sued. Agents must disclose material facts. A buyer is always, without fail, better off knowing the truth about a house. Good agents care that a buyer receives full disclosure and are willing to fight for repairs on the buyer’s behalf or help the buyer cancel the transaction.
:: Myth: All Real Estate Agents Make Too Much Money
False. An agent’s average annual salary is less than $36,000 a year. You will find that about half the agents in any large brokerage close less than four deals a year. Nobody can live on that. Not once office fees are paid, MLS fees and lockbox fees are deducted, overhead and expenses for the agent are deducted, errors & omissions insurance and office supplies are paid.
:: Myth: Agents Sell Their Own Homes for More Money Than Yours
False. Busy agents and top producers don’t have the luxury of time to waste when selling their own home. They also understand the market better than your average home seller, which means if a home isn’t selling within a reasonable period of time, it means it is priced too high.
I have witnessed first-hand what happens when agents put their residences on the market. If they need to sell, they might even cut the buyer a better deal than the buyer can get on the open market. After all, the person most likely to be persuaded by a sales pitch is a person who sells for a living.
:: Myth: Agents Should Tell You About Crime, Schools & Ethnic Make-up of Neighborhoods
False. Federal Fair Housing laws prevent a real estate agent from discriminating against a number of protected classes, which automatically prohibits an agent from disclosing anything remotely relating to the protected classes.
Therefore, it may come as a shock to many people that agents cannot disclose crime rates, school stats or ethnic mixes of neighborhoods. If that kind of information is important to you, an agent can tell you where to find it but cannot provide it.
Those who tell you otherwise are misinformed.
:: Myth: Agents Will Say Anything to Make the Sale
False. Although it is true that some agents will lie to you, it’s unfair to paint all agents with such a broad brush. Top producing agents, those who enjoy a solid reputation in the community and practice real estate honestly and truthfully, are very careful to uphold a client’s trust.
Making misrepresentations or a false statement is against the law. Agents who break fiduciary relationships or fail to disclose material facts are subject to prosecution and a loss of their license to sell real estate.
:: Myth: Agents are not Trustworthy
Being a real estate professional for over 8 years I’ve know of cases where people have branded the local agent as being “untrustworthy”. Most of the time the story will unfold where a buyer has either missed out on a property after they’ve made an offer, only to find out that the property had been sold from under them for a higher price.
Yes, this is a term they call “gazumping”. This happens with properties sold by private treaty – more so in a high market where there’s more than one eager buyer. There is nothing illegal about it. It happens!
Buyers need to remember that a selling agent is working for the seller not the buyer. The selling agent is engaged by the Vendor to achieve the highest possible price. In saying that, buyers need to be aware of 3 things when buying a property and that is: Ready, Willing and Able to move to an exchange of contracts quicker than others. If the buyer isn’t prepared, they leave themselves open to be gazumped. So at no fault of the agent, the agent will be called all sorts of things, one of them being untrustworthy!
:: Myth: Agents use dummy bidders at auctions
This is illegal. All bidders at a property auction now have to be registered. Their identification is screened and records are kept. You can’t bid if you haven’t registered. Registering yourself as a bidder will usually occur in the first half an hour before an auction commences.
These days the law allows a vendor to make their own bid during the auction – this is called the “Vendor Bid”. If a Vendor bid is exercised during the auction, the auctioneer will call the price of the bid and continue to call the auction. I think introducing this has been a successful way to eliminate the need for those agents who practice illegally. Just be aware that the vendor has the right to exercise only one Vendor bid during an auction.
:: Myth: Agents are dodgy with commissions
There’s no such thing as “doing a dodgy” on commission. It really depends on the area you are selling in and the price of the property and what type of property it is. In regional areas, I’ve noticed the fees are a lot higher compared to capital cities. There is no standard, so you just need to shop around and find what’s right for you.
An agent’s fees are an agent’s fees, and the best thing about it is, they are negotiable! If an agent can’t negotiate their own fee, how can they negotiate the best possible price on your property?
:: Myth: Agents will say & do anything to make a sale
I like this one, it makes me laugh. I was buying a property once and the agent didn’t know I also was an agent. She didn’t really say “anything” just to make the sale, but she talked the talk. That’s what sales is all about. Everything she said was true about the property but it was all sales talk.
I bought the property in the end and complimented her on her professionalism.
:: Myth: Agents work for kick backs
As agents, we are governed by strict laws that are heavily monitored by the Offices of Fair Trading. If an agent does receive a rebate or secret commission, it must be disclosed in an Agency Agreement and the client must be notified on what the rebate is and it’s dollar value.
Sure, agents do receive them, and there’s nothing illegal about receiving them, you just need to disclose them! Random audits of agencies are conducted by the Offices of Fair Trading, so you can’t slip through by not disclosing them. It’s not worth the risk.
:: Debunking the seven year moving myth
Analysis of the period from 1990-91 to 2013-14 indicates that as the dwelling stock in WA increased from 586,000 to 992,000, the average turnover time increased from around 14 to 21 years.
This indicates that owners and investors are holding property longer and debunks the long-held myth that households move on average every seven years.
:: Highs and lows
The peak turnover rate of 11 years occurred in 2005-06 during the height of the property boom and record turnover. Conversely, the longest turnover period of 25 years occurred in 2010-11 as markets across WA recorded turnover levels not seen since the 1990-91 recession. Subsequent regional and sub-regional analysis has been undertaken and reveals some interesting, surprising and not so surprising trends around WA.
In the Perth metropolitan region, the general shift in turnover is not as significant as the overall state figure, with the average turnover rate easing from 14 to 19 years. Disaggregating the turnover by dwelling type indicates that owners of multi-residential property (of which nearly 50 per cent are investors) have traditionally held and continued to hold property longer with elevated turnover periods compared to the detached housing stock which represents 78 per cent of Perth dwellings.
:: Mortgage Myths
:: Myth: A bad credit history doesn’t matter if you eventually pay it off
Your credit history records any missed or defaulted payments on things such as credit cards, interest free contracts, and mobile phone plans. A patchy credit history can haunt you – even if it is very old or just a one off small amount. There are two major credit reporting agencies that record all of these debts and lenders consult these agencies before they complete your loan application.
:: Myth: Assets are the same as income
No matter the strength of your assets, what really makes the difference is your capacity to repay the loan through a regular income. When it comes down to servicing, a lender will only lend as much as people can afford to repay. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.
:: Myth: It’s the credit card balance, not the limit that counts
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.
:: Myth: You need a 20 per cent deposit to get started
Not true. These days, you can borrow up to 97 to 100 per cent of the property value, which is proving to be an attractive option for many cashed up first home buyers who often wonder whether they’ll ever get their feet onto the property ladder. What’s important to remember is a lower deposit may mean a higher interest rate and fees.
:: Myth: Cheapest is the best
A ‘cheap as chips’ interest rate may be a good incentive to sign the dotted line, but beware – in many cases these loans may have higher fees and less flexibility, costing you more money over the life of your loan. A standard variable loan at a slightly higher rate with flexible features, such as the ability to make additional and lump sum repayments, can save you more money in the long run.
:: Myth: A fixed rate is always safer than a variable rate
Every home loan is different – so too are your home loan needs. What’s important to remember is that fixed rates are calculated by the capital markets over the period you sign-on for, whether that be for three, five, or seven years. If variable interest rates go down during this fixed period, you could end up paying a higher interest rate than compared to the standard variable rate.
:: Myth: Personal debts can be rolled into a new home loan
One of the most common misconceptions amongst first home buyers is that debts such as a car loan and credit cards can be consolidated into their new home loan. In many cases, you can’t immediately put all your eggs in one basket when it comes to your first home. Rather, you need to wait until the property builds some equity to service the additional debt. Once you have built enough equity, you can refinance and roll all your additional debts into the mortgage.
:: Myth: 100 per cent loans = no money upfront
Most people tend to think that a 100 per cent loan means that they do not have to pay any money upfront – however, this is not true. A 100 per cent loan does cover the property purchase price but does not extend to the additional upfront fees involved in buying a home such as legal fees, Lender’s Mortgage Insurance, purchase and mortgage duty.
:: Myth: Mortgage insurance protects the borrower
More commonly known as Lender’s Mortgage Insurance, this form of insurance protects the lender, not the borrower. The less deposit you are able to pay at application, the higher the premium you pay to compensate the risk. Generally, if you have more than a 20 per cent deposit you are not required to pay Lender’s Mortgage Insurance.
:: Myth: Home loan offset accounts save you money
Offset accounts are not for everyone – people with poor spending habits or irregular income would be best to avoid these. With a home loan offset account, your income goes into the home loan and you use a 55-day interest free card for your expenses. The home loan is then swept every month to pay the balance owing on the credit card. If handled correctly, you can pay less interest on your loan over the loan term. If handled poorly, you can end up spending more, creating negative equity.
:: Myth: Making your repayments minimum and monthly is the best strategy
Not true. In fact, the interest on a home loan is calculated daily and is charged monthly, so the more regularly you make repayments, the less interest you pay over the life of your loan.
:: Myth: Refinancing costs you money
Staying with your existing lender often seems so much easier, however, lenders fighting for market share are putting home owners in the driver’s seat. With heavy discounting now becoming a widespread practice across the industry, home owners can reap the benefits and potentially save tens of thousands of dollars over the life of their loan.
Remember, although buying a property can be both exciting and daunting, it is a process that can be managed by following one golden rule – “proactively increase your knowledge”.
Get a Private Property Pro Agent & go to guy…
Monitor & manage your “Positive Expectancy” which is the imaginary green light that goes off in our heads to go for it…. Sell or Buy.
:: DIAL DEAN