The average homeowner will only buy or sell a house a handful of times during their lifetime, if even that. As a result, the industry of real estate exists as a sort of mysterious, intimidating netherworld that most homeowners are reluctant to delve into. That’s why it’s so important for real estate agents and property managers to have warm, welcoming personalities and be able to communicate efficiently with their clients. It’s crucial that any incorrect assumptions or misunderstandings about the real estate industry are straightened out in order to make the entire transaction as smooth as possible for buyers, sellers, and agents alike. Here are some of the most common real estate or property management myths that plenty of clients still believe, and the ways that a good real estate agent or property manager can dispel them.
The 7 Biggest Myths and Misunderstandings about Real Estate and Real Estate Agents:
- Literally everything about how real estate agents make money.It’s really quite astounding how much confusion there is about how real estate agents make a living, but it’s understandable that your clients might be wary about this. It’s a sad fact that, no matter what the industry, there are going to be many people find themselves tricked or swindled after investing in a service that lets them down. Buyers and sellers alike are only looking to make sure they receive a fair deal, and as a result, many have cynical opinions about how real estate works and how real estate agents operate. It’s no secret that the majority of real estate agents present themselves professionally: wearing neat suits, well-mannered and organized, able to throw elaborate open houses or marketing events, maybe throwing elaborate marketing events and open houses, or perhaps even taking their clients out to lunch! How can they afford this lifestyle?The truth is, plenty of real estate agents aren’t rich. It’s not a matter of making a lot of money, it’s about prioritizing their personal budget since person-to-person interaction makes up the entirety of the job. It might seem unbelievable that there’s not a secure salary supporting each real estate agent, but in the vast majority of cases, there is no backing salary paid to the real estate agent. Instead, if the agent is employed by a real estate brokerage company or firm, commission from the sale is paid to that company, which in turn takes a percentage of that commission in order to keep the company running and then hands the rest over to the agent.So it’s not necessarily true that real estate agents are self-employed in 100% of cases, but make no mistake that nobody is paying the real estate agent to do their job. All of their expenses and investments – gas money, clothing, car repairs, everything you could think of – are all the real estate agent’s own responsibility. Don’t forget the marketing expenses: digital marketing, websites, open house events, design and printing of brochure, etc., all come straight out of the real estate agent’s pocket.
How does this handling of the real estate agent’s wages, for lack of a better word, even work? It depends on each individual case. If a real estate agent represents a buyer, they will earn the listing side commission, while if they represent the seller, they will earn the selling side commission. In some cases, real estate agents might even handle both halves of the transaction, but it’s not an easy job.
The size of the commission can range from 5-10% (sometimes an even broader range) depending on the sale, and the amount that the brokerage company takes from that commission also depends on the experience and standing of that particular real estate agent. So it’s important to understand that there are a lot of variables, and most of all, that helping both parties – buyers and sellers – close a deal is in the real estate agent’s best interest, so you can rest assured that real estate agents are here to help!
- Homes can pass or fail a real estate agent inspection.It’s not a college dormitory or an audit from the government! Real estate agents don’t have any kind of authority to condemn a home if it’s falling apart – they can contact a higher power, sure, but on the whole, home inspections are simply meant to examine the current condition of a home and provide feedback that makes the expenses of the transaction as realistic as possible. The real estate agent will then write up a report that details the age and condition of the backbone of the home, such as the roof, plumbing system, electricity, and more. That’s pretty much it.It’s not meant to be scary. Sure, homeowners will get defensive and not like the idea of an inspector taking notes on every tiny blemish, but real estate agents are not “out to get” anyone. More likely than not, a property will have some less-than-perfect areas that need work. This isn’t a bad thing – remember what we learned in kindergarten: honesty is the best policy. If a seller is concerned that the inspection will “find something,” they should make sure to do a thorough inspection and assess any damages before they put their home on the market. Keep in mind, however, that renovating every room and inner mechanism might not be the smartest move. Even if a prospective buyer doesn’t like your taste, they’re not likely to want to spend money renovating something that has just been updated, and this might make them less likely to buy your home. Only focus on making repairs that are absolutely necessary.
- All real estate agents are exactly the same (read: greedy, cheating liars!).Remember that real estate agents work pretty independently. There’s no way that two real estate agents will ever have exactly the same approach to closing deals – creativity and resourcefulness are huge variables among the real estate industry. Some real estate agents might appear so energetic that they end up looking scatterbrained, and their brilliance isn’t on display until the moment you least expect it. There are others who might appear a bit colder and less friendly, but their organizational skills are off the charts. In any business, you will have members of the industry whose tenacity sets new standards of excellence while others will do the bare minimum to close a deal and run off quick with their commission. Bottom line: don’t make assumptions about what makes a “good” real estate. Some traits have to be constant in order to be a successful real estate agent – organization, communication, responsiveness, and math skills are some of the unofficial requirements of being a good real estate agent.
- Buyers can negotiate more aggressively when homes have been sitting on the market for a long time, because the seller is likely desperate and running out of options.This is not a tried-and-true adage. Consider why a house might have been sitting untouched for months at a time. If a house has been sitting on the market, there is definitely a chance that they haven’t received many offers due to a less-than-ideal location or internal layout – however, this is not an excuse to make an aggressively low offer, hoping that the seller will jump on the first offer to come along, as the seller likely has a family to support. However, if there is a beautiful house in an ideal location that hasn’t sold for months, you can make a fair guess that the seller is unrelentingly stubborn about the asking price and is willing to wait until they get what they want.On a very similar note, you might notice that some listings show a series of price reductions. You might think that a seller reducing their asking price is desperately looking for a deal and will take the first offer they get, no matter how low. On the contrary, this is more likely to be an indication that they have been trying to sell for a while and they understand their asking price is not competitive enough. This likely means that the seller is not at all interested in the idea of negotiation. Sure they want a deal fast, but they want it fair.
- Making low offers on a home is a smart way to negotiate.Negotiating is a part of the game, and buyers and sellers both know this. That’s why it’s important to trust a real estate agent to handle the tough parts. Making too low an offer will result in the seller not taking your interest seriously, and you likely won’t receive a response, or if you do, the counter-offer is going to be higher than you can afford. It’s important to have a realistic idea of the homes you can afford to look at, and if you have your heart set on a certain home that you can’t afford, a real estate agent might be able to find some way to arrange for a discounted price – but bidding unrealistically low is not the way to accomplish this.
- Setting a high asking price for a home makes it more likely to get a realistic value.This is a common real estate myth highly related to myth number 5. Many rookie sellers will think that overpricing their home is a valid defense against taking less from a buyer than they want. The idea is that as buyers negotiate, the seller can offer the illusion of a discount and still walk away with a fair value. Unfortunately, as we saw in myth number 4, overpriced homes tend to not receive much interest or activity. Competitive pricing will attract more interest and make it more likely to earn a realistic value. Not many buyers are interested in making “low” offers, as they figure there won’t be a chance that the seller will sell for much less than they ask for.
- You’ll save money in the end by handling your real estate transaction yourself, without hiring a real estate agent who will only take a chunk of your price.For buyers, this idea simply doesn’t make sense. The asking price covers the real estate agent’s commission – you won’t get a better deal on a home by not using a real estate agent. For sellers, however, there is more temptation not to use a real estate agent, as the commission is coming out of the money that goes to them. Sure, plenty of people are able to sell small properties like cabins and homes quietly on their own, but it requires a skill set that not everybody has – negotiation, marketing, loans, and more. However, most buyers tend to expect a discount on homes that are not sold through a real estate agent, as not using a real estate suggests to skeptical buyers that the seller is trying to cut corners on contracts and inspections. Think about it the image it puts out: the seller might not be trying to cut corners on those things specifically, but they are looking to save money by not hiring an expert.
Hopefully, you now know why myths and false preconceived notions can be so dangerous: they can seriously hurt your chances of closing a deal at a fair price. The worst part about these misconceptions is that people often don’t even know what it is that they don’t know! Take the time to look up various myths and debunk them for yourselves, and your real estate experience will go much more smoothly.