Buyer Myths

MYTH: "A home is only worth twice the State Equalized Value."
FACT: State Equalized Value (SEV, equal to 50 percent of the true cash value) is not a true indication of a properties market value. SEV is established when a home is first built, and again whenever it changes hands or has gone through extensive remodeling. The SEV may increase to reflect fluctuation of local property values, but will not change radically unless the size of the home has changed, or the property changes hands. Tax Value, or TV, is initially set as half the true tax value. This amount will increase annually reflecting inflation, to a maximum of 5%.

Why the SEV is not accurate. Three homes, A, B, and C were built at the same time and sit beside each other in a subdivision. They were initially identical in size and detail.

Over time each homeowner has treated their home's differently. The owner of home B has taken care of things as they've need done, but has not made any major improvement to the home. His neighbor, the owner of home A, has been raising five children, taken on several pet dogs and has little time for taking care of his home. His carpet is ruined, the landscaping has been let go, a leak in the basement has never been fixed, and the interior is in serious need of painting. Neighbor C loves working around the house. He has installed a new multi-level deck, finished off the basement and installed an expensive home theater, and because he likes to cook, he's replaced the builder grade appliances with top of the line gourmet units. His landscaping is gorgeous and includes exotic plantings and a waterfall and pond for his outdoor fish.

Home B, the average home, is listed and sells. Because comparisons are based on the square footage of similar home in the neighborhood, both home A and home C receive the same SEV figure.

MYTH: "The seller will pay my closing costs".
FACT: The phrase implies that sellers frequently pay the Buyer's closing costs, but this is far from the truth. Closing costs can amount to as much as 6% of the purchase price and Sellers are rarely in a financial position to offer such a substantial gift to the Buyer. So, where do "closing cost" funds come from?

This is how it works. Suppose you're making an offer on a home priced at $150,000 and your lender has advised you that closing costs on the mortgage loan will be $3000. You've decided to offer $145,000 for the home and ask the seller to pay for your closing costs. Your offer would then be $148,000. 

Should the seller agree to the price and terms, he will net $145,000 (before paying his closing costs) and you will be provided with $3000 to apply to your closing costs. In reality, your mortgage loan will be for $148,000 and will cover the price of the home ($145,000) and the closing costs ($3000).

This is a common and acceptable way of doing business. It provides a means through which a buyer can borrow money he was unable to save.

MYTH: "The seller must accept a full-price offer".
FACT: Normally, a homeowner would have no reason to refuse a full-price offer. However, the seller does not have to accept a full-price offer if he has a problem with other conditions in the offer, such as your financial arrangements or the occupancy date. Also a homeowner may find that he is sitting on a "hot" property with buyers fighting for the chance to get the home. If he has been informed that several offers are to be presented, the seller will wait to see all offers before making his decision. Even if the first offer presented is for full-price, he need not respond to it if he believes that he might receive higher offers. In fact, there's nothing in real estate law that requires a seller to respond to an offer.

MYTH: "Homes are intentionally overpriced to allow for negotiation".
FACT: This may be true in some parts of the country, but not in the Lansing area. A Realtor in the Greater Lansing area will usually advise his client to price the home close to its true market value. Overpricing a home so that there is “room to negotiate” will only cause the home to linger on the market. It will be unappealing in comparison to the competition, and may never sell. As it’s in everyone’s best interest to price the home properly, we generally expect the asking price of each home to be fairly close to what it should be. 

Does this mean that all homes are priced correctly? Absolutely not! Often a seller will order his agent to overprice the home. This might be the result of a seller owing too much on his mortgage, having invested too heavily in updates and improvements, or simply an emotional attachment to the property.


MYTH: "Once I make an offer, the seller can't negotiate with anyone else ".
FACT:  The seller is free to negotiate with anyone he chooses until such time that he and a buyer have agreed to the terms of a fully executed contract. A buyer can not "tie up" a listed property simply by placing an offer on it.

Once the buyer and seller have agreed to terms, a contract has then been established. At such time, the seller is no longer free to negotiate with another party, except to place that party in a "backup" position.


MYTH: "Location, Location, Location. It's not that important".
FACT: Yes, it is! A properties location will determine how valuable it may become. If you don't believe it, think about the value of lakefront property.

MYTH: "I'll have better luck finding a home if I work with several agents".
FACT: Some shoppers give their name to several different Realtors hoping that by working with an agent from each major Real Estate firm they’ll get better results than by working exclusively with one Realtor. This method of doing business will most likely net very poor results.

Realtors don’t receive a salary and have no expense account. They are paid entirely on a commission basis, and only when they actually sell and close on a home. This is why it’s a bad idea to work with more than one agent. Each Realtor will feel that it’s not financially worthwhile to spend much of their time working with you because they know that you may purchase your home through one of the other agents. You simply won’t get the dedication or service you may be expecting.

Consider this…the perfect home, the one you have been searching for, has just been put on the market. Each of your selected agents will soon discover it…but don’t expect to be called first. Your agents will make arrangements to show this home to more loyal clients before offering it to you.
 

MYTH: "I'll save a lot of money if I buy from 
             a 'for sale by owner'".
FACT: some buyers believe that because there is no Realtor commission involved, they will get a better deal if they purchase a home directly from a “for sale by owner”. The reality is that “for sale by owners” are doing their own marketing to save the commission a professional real estate agent would charge. So what is left for you to save?

In fact, you might end up paying more for the home than it’s worth. Most FSBOs have an emotional attachment to their property and almost always maintain a higher opinion of their home's market value than what is realistic. With only a vague idea of what the fair market price of their home should be, they tend to ask too much.

It’s likely that you’ll be dealing with an untrained novice who is unfamiliar with real estate law or the real estate code of ethics. Without guidance, the seller may not have properly completed his disclosures or may fail to discuss issues about the home that may cost you money later.

Seller Rumors

MYTH: "My home was recently appraised, so I know
             how much it will sell for."
FACT: You may have recently refinanced your home and now possess an Appraisal stating that your home is worth a certain amount of money. Appraisals may not offer an accurate measure your home’s market value. The Appraiser’s job is to assure the purchaser of the appraisal that your home is worth a certain amount for a given purpose. Appraisals can vary significantly depending on circumstances such as refinancing, setting an estate value or the cost of insuring a property. Evolving market conditions and customer appeal are not factored into an appraisal.

MYTH: "My home needs repairs, but it hasn't sold because the "right" buyer  
             hasn't come along".
FACT: You might get away with this kind of thinking in a seller's market, but in a buyer's market it's financially impractical. With such a huge inventory to select from, buyer's will usually choose a home that is already decorated for their tastes. It's much easier for a buyer to fall in love with a home that says "WOW" verses one that will require many hours of stripping wallpaper. Also, you can't assume that the buyer will want to take over your repair work. Today's buyers are often stretched for time and/or money when they take possession. They're not really interested in additional work or expense.

MYTH: "It doesn't matter which Realtor you list your home with".
FACT: Selecting the right Realtor is vital to the sell of your home. Successful selling in the current market requires more time and energy then at any time in the past. Each Realtor works in a different way. They each have different skills and market strategies. Some are full time Realtors who work at this profession 24-7. The majority are part-time Realtors who are hoping to make a some extra money in their spare time. You can expect a good, full-time Realtor to give you the service your paying for. You have to decide if the Realtor you choose is able to provide the kind of service necessary to effectively market your most expensive financial investment.

MYTH: "I'll save a lot of money if I list through a discount broker".
FACT: The fee will be lower, but so will the amount of service. Marketing a home requires more than placing a sign in the yard and securing an MLS listing. Successful marketing involves many hours of skillful preparation and extensive promotion to attract qualified buyers to your home. Afterwards, a lot of time and energy is required to make sure the deal is closed properly. Let's face it, a discounter can't afford to spend very much time or money on your investment.

It's interesting to note that the discount brokers in this area are responsible for a very small share of the number of sold homes.

MYTH: "I should list with the Realtor who says he can get the best price".
FACT: No Realtor can get you an unrealistic price. Your home will attract offers that are consistent with it's location, condition and appeal. Most importantly, your home will be judged by its competition.

MYTH: "I should list in the spring. No one shops for a home in the winter".
FACT: While it's true that more buyers are shopping in the spring and summer, a great many homes are sold during the winter months. In our modern society home buyers are moving around the country all through the year. Statistics have shown a growth in the number of homes sold in the winter months. Not listing your home during the slower periods, only serves to make it unavailable to a potential buyer.