Real estate isn’t something that most people well versed in, so there may be some false information being shared by people who aren’t intimately familiar with the process of residential real estate. Someone who bought a house 20 years ago may think the process is still the same and share outdated information with other people, who then go on believing it to be true.
It can be a surprise when someone starts the home buying process and learns that the process is not what they thought it was, whether for the good or the bad. As a real estate agent, you may run into some of these myths about real estate, so it’s good to know what sort of misinformation is out there. Here are some common real estate myths – busted!
All agents make a ton of money.
False. Real estate agents only make a small portion off the sale of a home. The seller pays the realtor fees for both the seller and buyer, which is usually about 6% of the sale. That commission is then split between the two agents once the brokers take out their fees. A house that sells for $300,000 leaves a 6% commission split of $18,000, so each agency ends up with $9,000. If that house ends up in a bidding war and sells for $350,000 instead, the 6% commission split is still only $21,000, leaving each agency with $10,500. Most agents pay for marketing out of their own pockets, so once those costs come out, plus taxes, and other item like gas, car maintenance, health insurance, etc., the amount they bring in is even lower. Real estate agents have to sell a lot of homes, or a few very expensive homes, to make a significant profit. Real estate agents do have an unlimited salary potential, but it all depends on how much work is put in, hours worked per week, and homes sold. The national average salary for real estate agents is $82,898 per year.
Agents can show you any house you want.
False. As a buyer, you have to be under contract with an agent for them to show you homes. Also, a listing agent for a seller isn’t obligated to show a buyer a listing if they’re represented by another agent, unless that agent requests that the listing agent shows the home. If someone isn’t planning on writing an offer and they just want to look at homes for fun, you don’t have to spend your time and energy on something that won’t lead to a sale. You can politely let the clients know that when they are ready to purchase a home, you’d be happy to work with them and show them homes that meet their criteria and fit in their budget. You are not obligated to show homes if a client isn’t under contract, or if they’ve made it clear that they aren’t going to write an offer.
Agents will say anything to make a sale.
Any agent worth their salt will be honest with a client. As an agent, you are held to a very strict code of ethics, and many rules and regulations. Many people believe this myth because agents don’t get paid until a home closes, so they assume that the agent will say anything to make the sale happen faster so they can get paid faster. You want to do what’s best for your client, but you also don’t want to be sued or lose your license.
Agents must disclose material facts, and a good agent wants their client to have all the knowledge possible to make an informed decision before writing an offer. While there are some agents out there that will bend the truth to make something sound better than it is, it’s unfair to lump them all in that category. A reputable agent cares deeply that their client finds the house that meets their needs, because a happy client means referrals, which is how agents continue to build their business.
Pre-approval happens after finding the perfect home.
False! Many buyers believe that getting pre-approved doesn’t happen until after they’ve found the perfect home. A buyer should be pre-approved before they even start house hunting so they know how much they can actually afford. A buyer may find the perfect house, write an offer on it, and then get denied by the mortgage lender, missing out on their chance for the house. In the event of a bidding war, a buyer that has been pre-approved has an advantage because they have proof that they can actually afford the home.
Open Houses Sell Homes.
Not usually. According to the National Association of Realtors, only 2% of homes are actually sold because of an open house. Real estate agents like to hold open houses because it’s an opportunity for them to pick up new clients. For example, when my husband and I were in the early stages of house hunting, we went to open houses in the area just to see what kinds of features we did and didn’t like. We happened to run into an agent at one of those open houses that we really clicked with, so we ended up signing a contract with her and she helped us buy our first home. So, while open houses can help sell a home, it’s more likely that they won’t.
Selling as “For Sale By Owner” Saves Money.
Wrong again! Sellers believe that selling their home as “for sale by owner” (FSBO) will help them save money on transaction/agent fees. Selling a home isn’t easy, especially if you’re trying to do it yourself. With an agent, the house can be listed in the MLS, which is where most buyers are looking for homes because they can be alerted immediately if something new hits the market that matches their criteria. With an FSBO, they’re relying on word of mouth or a sign in their yard. And there will still be fees – they will still be responsible for closing fees, possibly a seller’s fee to pay the buyer’s agent, and they may still end up on the hook for appraisal fees and any repairs necessary after a home inspection. There’s also a lot of legal jargon in real estate transactions, so unless they know how to understand the contracts, it’s best to use a real estate agent. A home can be sold as FSBO, but it ends up taking far more time, and the seller will likely lose money by not being able to negotiate a fair price.
List the house high.
Don’t do this. If the goal is to make as much money as possible, this won’t work. Interested buyers are looking at things like price, bedrooms, bathrooms, and square footage, and if a house matches the criteria but is out of their price range, they’ll move on. Buyers are looking at comparable homes in terms of the features they offer and the price, and if a house is well over market value, it won’t get offers. The seller can end up losing money by pricing too high. If someone does show interest, once appraisal time comes and the price is too high for what the appraisal shows, they’ll end up having to negotiate the price down anyway. The seller will want to price the house competitively for the current market, but not so high that people just brush past the listing. A good agent will be able to help price it appropriately while still allowing them to get the most bang for their buck. Buyers also get suspicious of houses that sit on the market for more than a couple weeks, because they start to wonder what’s wrong with it that no one has put an offer in yet.
Hopefully this information can help you debunk any real estate myths your clients may bring to you. It is important to approach buying or selling a home with as much accurate information as possible as it can help avoid costly mistakes.
And if you’re ready to start your career in real estate, let us know! Our team is ready to help get you started on your journey. Feel free to contact us at firstname.lastname@example.org or 866-492-1867 with any questions.