Those of us who spend the day preparing guides, compiling tips, and generating helpful content usually pass right over anything labeled "bad" or "worst." We are interested in digging up "good" and "best." But hearing what some people consider bad real estate advice lets us take a step back and consider both sides (when there are two sides).
Here is some of the worst real estate advice people have heard. Do you agree?
"Always Use a Real Estate Agent"
"No!" cries Ruben Alaniz, an engineer in the building industry. "Unless you like throwing away your money. There are other options. The best, in fact, is a face-to-face purchase with the owner and going through a mortgage company or bank. Both of you will save thousands."
Agents are overpaid, in his opinion. "At minimum, an average realtor will make 6% of the closing price. Now you still have to pay listing fees on top of that and other goodies." On the other hand, a real estate agent's commission is negotiable.
Agents don’t keep all of their commission. They split it with their broker. Splits between agents and brokers vary, but 50/50 is common for new agents, while more experienced agents can have splits as favorable as 70/30. Because the agent's personal share of the commission may end up closer to 3% than 6%, you will understand that agents are often reluctant to lower their commission.
For some sellers, an agent is worth every penny. They allow you to continue living your life normally as they intercept calls and messages, they sift through the inquiries, they stage and host the open house, they negotiate in your interests, and more.
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For buyers, an agent has access to titles so you can learn about whose home you are buying. This could give you an edge in choosing a home and negotiating a price. For example, if the owner is in divorce proceedings, you can assume he or she is motivated to sell and won't drag out the process. This home could be yours faster than, say, a similar home in the same neighborhood where the owners are taking their sweet time.
"Expect a Bidding War"
With today's stiff competition for homes you might fear that a bidding war is inevitable, but they are less common than many people suppose. Agents usually advise sellers that sparking a bidding war can backfire, causing buyers to walk away in frustration.
You don't want any part in a bidding war, says Steve Budhraja, an administrator at California State University, Long Beach. Naturally he favors educating yourself well before buying a home. "Always do your homework. In other words, look at all the stats (unemployment, crime rates, valuations over 10 years, cost of house per square foot over the years, etc.).
"Especially don’t get into bidding wars, as you don’t always know who you're dealing with!"
"Don't Ask the Seller to Fix the Problems"
During a home inspection, finding a problem or two is almost inevitable: an HVAC system near the end of its service life, for example, or cracked weatherstripping around windows and doors. When the problems are minor, buyers are sometimes told not to ask the seller to fix them lest they make the seller mad.
That's bad advice, per former contractor Chris Wilson of Portland, Oregon. Either ask the seller to fix the most concerning problems, or at least leverage those problems when you negotiate the deal.
"Being a former contractor, and still in the construction industry, I will tell you to make them repair, or negotiate the price," he says.
A seemingly minor problem could be the tip of the iceberg. "I have a customer who purchased their home approximately a year ago. Their inspectors caught the obvious damage, and they negotiated a price based on that. What my customer didn't know until engaging my company for the repairs (that needed doing, the known ones) was the amount of the damage that the inspector didn't find, because they are not allowed to do destructive investigations. Basically what should have been at max a 14-day, $40,000 repair turned into a minimum 21-day, $70,000-plus repair."
Sometimes you are better off buying the problems but getting a lower price because of them. That's the opinion of small business owner Tonya Winter. "I chose to get them to fix some of the things from the inspection and regretted that later," she says. "They made the cheapest fixes possible and I ended up dealing with it again later. I wish I had asked for a price break instead."
"You're Too Old to Invest in Real Estate"
Because of the large sums involved, real estate investing is often a long game. Appreciation takes time. That's why some people in their 40s hear that it's too late for them to get into real estate investing.
"It's never too late," counters Curt Sutherland, a real estate investor in Austin, Texas. "If you start buying properties at 35, many of them will be paid off by the time you are 55. A number of paid-off rental properties should make for a very comfortable retirement."
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After all, you don't need to pay off a mortage before you can sell a property. You can sell when the value has increased enough to make it worth your while. Sutherland says, "My dad bought an investment property when he was 82. He passed away soon after, and my mom decided to sell the property since it was out of state. They only owned it for about six months. I think they paid a little under $50,000 and sold it for enough to net around $15,000 after repairs."
Now that you have seen some people's picks for worst real estate advice, brush up on good advice on our blog. When you are ready to shop for a great mortage, let Lendgo match you with your best offers.