Misconceptions include notions of a 'perfect' house; that length of time on the market means easier negotiating; that lowball bids are OK in a buyer's market; that distressed property sales are easy and cheap options; and that prices will continue to fall in down markets.
By Lew Sichelman
July 24, 2011
When it comes to real estate, all is not always as it seems. Many buyers — and some sellers — labor under misconceptions that could sink their housing aspirations.
Take the notion that you will hunt for a house until you find the "perfect" one. Sorry. There is no such thing as the perfect house. Even gently used houses come with blemishes. And new homes rarely, if ever, have absolutely everything you want at the price you want to spend.
Another popular myth is that the longer a house is on the market, the more willing the seller will be to negotiate. Not necessarily.
A long time on the market could be a sign that the seller has dug in his heels. He could be hardheaded about the price, unwilling to come down and unwilling to bargain. Perhaps it means the seller is unmotivated. Or it could be an indication that the seller is just tired of the long, drawn-out process.
"After some point, most sellers become exhausted," says Bill Kuhlman, broker-owner of Kuhlman Residential Real Estate in Needham, Mass.
Among the frustrations that can sap a seller's spirit and stamina, Kuhlman lists these: the need to keep the house in showroom condition for months, having to put the house back on the market after one issue or another sinks a deal that looked so promising, having to put more money into the place to improve its marketability, or having to cut the asking price to the bone in a series of unsuccessful attempts to entice a buyer to step forward.
"Any of these can extract a heavy toll," Kuhlman says. "And they can become overwhelming when two or more of them come into play."
Add into the equation that moving is stressful, or that the seller is starting a new job or a new life, and it's possible that the seller will act irrationally. Maybe he'll balk over a minor issue the buyer wants fixed. Or if he feels slighted, perhaps he'll break off negotiations altogether.
The bottom line: There is no way of knowing how a seller will react to an offer, so assume nothing, Kuhlman says. "All buyers can do is make an offer that makes sense to them at the time and see how the seller responds."
Speaking of offers, many people believe they can make any bid they want, no matter how ridiculous, because it's a buyer's market. False. Even foreclosures and short sales are never priced at half their value "or anything even close to that type of fire-sale discount," says Christina Rordam of Exit Real Estate Results in Longwood, Fla.
Besides, starting exceptionally low because you can always go higher could offend the seller to the point that he won't respond. Or if he does and you end up buying the place, you could be in for a difficult transaction because the seller just won't like you.
"Homes are personal, and sellers take such things personally," says Lou Barbee of Re/Max Real Estate Group in Rocky River, Ohio. So if the inspection turns up a few issues that you would like fixed, don't expect the seller to make the repairs because you've already nickel-and-dimed him to the point where he is not going to lose any more money, no matter what.
Another popular misconception involves distressed properties and the notion held among many folks that buying one would be cheaper and easier than working with a seller who's under no particular pressure to ink a deal. Not so, says John Platten, a Keller Williams agent in West St. Charles, Mo.
When you're buying a foreclosure from a bank or dealing with a lender on a short sale, don't expect logical or rational decisions, Platten warns. "Banks work on their own set of rules, have their own priorities. They make decisions based on the financials at the moment and usually don't consider the future costs of a delayed sale or the condition of the property."
In fact, distressed sales often take much longer than normal to close if they close at all. And they are far more difficult, which is why Sue Paskert of Courter Realty in Tampa, Fla., won't touch them.
"Lenders are extremely difficult to deal with, whether it be a lack of communication or incompetence, who knows?" Paskert says. "But it takes many months to get approval. And in the end, the buyer may not get the house and, therefore, lose out on other good deals."
Then there's the notion, especially among first-time buyers, that they need the advice of their parents or friends before making a decision. After all, Dad or best buddy knows as much about the real estate market as their agents, if not more. Wrong — especially if these relatives or friends haven't dabbled in real estate for years.
Finally, if you like a place, try to buy it. Don't wait, especially in markets showing signs of recovery.
Keith Elliott of House to Home Realty in Fairfax, Va., had clients not long ago who found a home they liked, only to lose it because they wanted to wait because the market was still down. As a result, someone else snatched up the place.
"When it sells and they didn't get it," says Colleen Cotter of Keller Williams in San Diego, "they are mad and accuse the agent of not making them act." But if you wait for prices to drop some more, you may have only yourself to blame.
Source: LA Times
