Real estate law myths can create confusion and significantly impact buyers, sellers, and agents. Debunking these myths is essential for ensuring smooth and successful real estate transactions. In this article, we’ll tackle some of the most persistent myths and offer the truth behind them.
Myth #1: Selling your home FSBO (for sale by owner) will save you money
Many people believe that selling their home by themselves, without the help of a real estate agent, will save them money. However, this is often not the case. FSBO homes often sell for less than agent-assisted sales. For example, FSBO homes sold for 6% less than agent-assisted sales in 2017. It can be attributed to the expertise and marketing capabilities that agents bring to the table, which can result in a higher selling price.
Myth #2: Homeowner’s insurance covers all foundation issues
Many homeowners assume that their insurance policy will cover all foundation issues. Unfortunately, this is not true. Homeowners’ insurance typically does not cover foundation issues caused by normal wear and tear or settling. It is essential to understand your insurance for foundation coverage and possible issues, along with potential gaps, and consider additional coverage if necessary.
Myth #3: Listing your home at a higher price guarantees a higher selling price
The belief that listing a home at a higher price will result in a higher selling price is another common myth. In reality, overpriced homes often stay on the market longer and ultimately sell for less than market value. Overpriced homes can take twice as long to sell and may end up selling for 5% less than market value.
Myth #4: New homes don’t require inspections
Some people believe new homes are defectless and don’t need inspections. It is not true, as even new homes can have construction issues or hidden problems. Hiring a professional home inspector, even for new homes, is crucial to avoid potential issues and costly repairs later.
Myth #5: Real estate agents are only interested in their commission
A common misconception is that real estate agents prioritize their commission over their clients’ best interests. However, buyer agents have a fiduciary duty to put their client’s best interests first and provide expert guidance throughout the transaction. A good agent will work diligently to help their clients achieve their goals, whether buying or selling a property.
Myth #6: Lowering the Realtor’s commission will net more profit for the seller
Some sellers believe that offering a lower commission will result in more money for them. However, lower commission rates can lead to less interest from buyers and cooperating brokers. It can ultimately result in a lower selling price, as GOBankingRates points out. Offering a competitive commission can help attract more interest and potentially lead to a higher selling price.
Myth #7: You must pay off your mortgage before selling your property
A widespread belief is that homeowners must pay off their mortgage in full before selling their property. It is not true. In most cases, when you sell your home, the outstanding mortgage balance is paid off using the proceeds from the sale. This process is called a mortgage payoff, and it happens at the closing table.
Any remaining proceeds after paying off the mortgage will then be given to the seller. Homeowners need to understand that they can sell their property at any time during their mortgage term as long as the sale price is sufficient to cover the outstanding mortgage balance and any associated fees. In some cases, if the market conditions are favorable, selling before the mortgage is fully paid off can result in a profit for the homeowner.
Myth #8: Data analytics can solve all real estate problems
Data analytics has become a powerful tool in the real estate industry, but it is not a magic solution for all real estate challenges. It is essential to understand the limitations of data analytics and use it as a resource rather than a cure-all. For example, data analytics can provide valuable insights into market trends and property values, but it cannot replace the expertise and personal touch of a skilled real estate agent.
Conclusion
Debunking real estate law myths is crucial for successful transactions for buyers, sellers, and agents. By educating themselves on real estate laws and practices, individuals can avoid falling victim to these misconceptions and make informed decisions throughout the process. Knowledge is power, and understanding the truth behind these myths can lead to more successful real estate transactions for all parties involved.
