Bursting the Bubble on Some Real Estate Myths

I'm amused, how many myths about real estate continue to exist. Many people believe these things, yet most of them are specious at best. I’m going to dispel seven of the most commonly held myths.

Myth #1 - You Should never buy the most expensive home in a neighborhood.

What a home is worth “to you” is what is important. But, think about this. At any point in time, some home has to be the most expensive in a neighborhood. If there is a good reason why it is the most expensive and it meets your needs and desires perfectly, maybe you should consider adjusting your view. Let's assume you are looking for a home in a neighborhood where people buy up old homes or bungalows and substantially enlarge, remodel, or even replace them. There are some neighborhoods called "tear-down neighborhoods" where nearly every home sold is torn down and replaced by a larger, more expensive home. So, you may find a neighborhood where a home that has already been remodelled and updated is priced above those that have not yet. If you are prepared to live in the home for a number of years, ask yourself, “what will the neighborhood average price be in 2 or 3 years after most of the remaining older homes have been updated or replaced.” You may be looking at a bargain today.

Myth # 2 - Builder-suggested upgrades add to the resale value of the home.

Not true. What is true is that upgrades add to the profit the builder will make on the home. Whether a given upgrade adds resale value to a home depends upon how popular that upgrade is with buyers. For example, solid surface counter tops like corian, granite or quartz are popular with buyers. Adding a closet to a room so when the home is resold that room can be classified as a bedroom will add value when the home is resold. But, paying extra for the latest color appliances may not. Generally it is smarter and frequently less expensive to choose the most neutral appliance, wall and carpet colors. Some other upgrades cost much more than they will add to the resale value of the home. A swimming pool, for example, seldom adds more than half what it cost to the resale value of a home. An experienced Realtor can provide you with this information.


Myth #3 - If a home has been for sale for a while, something is wrong with it.

Usually, what was "wrong" with it is that the price was just higher than any buyer was willing to pay. When people sell their homes, especially if they’ve lived in it for some time, they tend to over-estimate its worth. They “like the home just the way it is.” That doesn’t mean anyone else is going to be equally infatuated by it.

Time on the market is more likely simply an indication that the seller has been demanding more than the property is worth. Take the time to view it. It may also have a number of cosmetic defects that people didn’t like but which can be corrected at little cost. An example is a home with way too many colors on the wall, really out-of-date wallpaper, old-style dark stained kitchen cabinets, or way too much furniture making the rooms look smaller than they are. A competent Realtor hopefully would have pointed out these problems and had them resolved before the home ever went on the market but sometimes the seller refuses. So don’t refuse to view a home just because it’s been on the market for a long time. You may be looking at a home that has finally been priced correctly or that would be just right for you with very little effort or expense.

Myth #4 - Price per square foot is a good indicator of whether the price is right.

Knowing the price per square foot is at best only a slightly valuable piece of information. "A better metric," says Connie Belmont, a Sarasota FL real estate expert, "would be the 'price per useful square foot,' something you cannot determine without visiting the home. " And, by useful, we mean “useful to you and your lifestyle.”

Some floor plans are very efficient while others have lots of space wasted in corridors, excessively large bathrooms, bedrooms and/or duplicate rooms. A few years ago every home had to have a living room and a family room, an eat-in kitchen and a dining room. Today many people prefer more open floor plans where one “great room” encompasses the kitchen, dining area and living area all in a large, open area vastly reducing wasted square footage. It also gives the home a more open feel, something very popular for today’s home buyers.

In addition, a home with extra insulation, double pane windows, a high-efficiency heating and central air conditioning system, a newer roof, and popular trim and decor upgrades will have a higher cost per square foot and be well worth the extra cost.

Myth #5 - Buying a Foreclosure Property is always a good deal.

Let's define a good deal. "A good deal," according to one well-known Florida real estate expert, "is buying a house for under market value." In many ways, real estate properties act much like common stocks or any other type of asset. The less risk you are willing to assume, the more the asset (in this case a home) will cost. Foreclosure properties involve a lot of risk. That explains why they sell at prices well below other properties sold "at arm's length" in the same neighborhood. The risks you assume in buying a foreclosure property may reduce the market value of the property. If those risks turn out to be less than you had anticipated, you will have made a good deal. If those risks exceed your expectation, you could easily find yourself with a property that is going to cost a lot of money to refurbish impairing it's profit margin -- maybe even turning it into a loss.

Myth #6 - It's always better to get a bigger lot of land.

This one has really changed in recent years. Many buyers today are too busy to maintain a large lot and would just as soon have a smaller lot to care for. Given the busy lives many people lead, there is a trend today, especially in areas popular with retirees, toward “patio homes” where homes sit on very small, easily maintained lots but share larger common “community green spaces.” Unless there is some other reason why you want or need a large lot, there is no reason for you to pay extra to buy a home on a larger than average lot.

Myth # 7 - On a new home, the builder will charge more for the house if you use a Realtor® to represent you.

That is almost never the case. Builders are generally happy to have Realtors sell their homes. According to Janet Dugan, a Siesta Key homes for sale expert, "generally, builders consider the fee they pay Realtors to be part of their "marketing expense", money they have had to spend one way or another to sell their homes. In almost all cases, the home costs exactly the same whether you use the services of a Realtor® or not.

"In almost all cases," says Andree Huffine, a Sarasota Florida real estate agent, "it doesn't cost you anything to have the advice and counsel of a competent Realtor representing you. And," she says, "the Realtor may know things about this builder that you wouldn't otherwise be able to determine, like his his willingness to negotiate on price, his reputation for repairs after the sale and at what rate this neighborhood is being built-out giving you an idea of how long there will be construction machinery driving past your new home every day."

There are even more myths out there, but a competent real estate buyers agent like Brian Ward can help you sift through them and buy the home that is right for you, your family, and your lifestyle at a reasonable price.