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Erroneous assumptions about the business can cause a ton of confusion for the public about how the real estate process works.
The real estate process makes everyone an armchair expert by default. The buyer, the seller, their friends, co-workers and neighbors
After all, the last time they bought or sold a home was 10 years ago, and in their view, not much has changed. Misbeliefs and bad information are a dangerous combination.
People don’t know what they don’t know, and what they do know is enough to create false perceptions of a profession that is often surrounded by damaging assumptions. Here are 15 real estate myths — busted!
1. Real estate agents are paid a salary
Despite what many think, the public is horribly confused about how agents make a living.
There must be a salary floating in the background that supports agents — after all, how is it that they can appear so well-groomed, professional and polished while hosting lavish broker events, open houses or other marketing activities, showing customers around town all day and buying them lunch?
Attention perpetual house shoppers and sellers just testing the market: the agent’s time and expenses are 100 percent on them.
There is no base salary or reimbursement for the time and money they’ve expended no matter the outcome, whether it’s 500-plus messages or hours of research, advice, problem-solving, trouble-shooting, giving insight over the phone or making countless trips to show property.
How would you feel if your employer decided, as part of its cost cutting, to not give you a paycheck for your all of your work and effort, especially on a big project that involved a tremendous amount of time and effort on nights, holidays and weekends?
2. The agent keeps all the commission
First, the public needs to understand that commission is legally paid to the agent’s employing brokerage company, which in turns pays the agent.
Depending on what side the agent is representing (buyer or seller), their brokerage will earn the listing or selling side commission unless the agent happens to be handling both sides of the transaction.
It is a rare occurrence, but it does happen, and doing so is never a walk in the park.
No matter what the commission is, the amount paid to the agent is not the entire commission — the brokerage takes its portion (to be able to run the company to support its agents and keep the lights on), and then the agent gets his or her split.
The split varies based on the company, business model and the agent’s level of production.
There are usually additional fees that come off the top of the gross amount of commission being paid to the brokerage.
By the time all is sliced and diced, the resulting amount to the agent may surprise you. Then that agent has to remember to withhold money for taxes and social security. They make a living just like everyone else; the difference is the check doesn’t come every two weeks.
3. The typical commission is 6 percent, right?
Speaking of which, I recently had someone ask me this exact question.
The buyer wanted to purchase one of my listings and assumed that I would be receiving the “standard 6 percent,” to which I explained that all commissions are negotiable and vary according to a variety of factors with type of property, price and such in my market.
Every market is different.
4. An agent’s gas, mileage and other transportation expenses are reimbursed
If only real estate brokerages had a “transportation fund” to reimburse agents for these things.
The 25 trips to show a buyer homes every time a new one hit the market — only for the buyer to wait and see if something better comes along.
The three days spent driving all over town with a relocating buyer who decides not end up moving to that city.
The umpteen trips to a listing, prepping for showings, and continually checking on the vacant property; or meeting vendors contractors, photographers, etc. — none of it is paid for by anyone but the agent.
Driving into new construction neighborhoods that are rife with tire-puncturing nails — the gas, tolls, vehicle wear-and-tear and maintenance — it all adds up, and it’s all on the agent.
5. Marketing expenses aren’t the agent’s responsibility
Speaking of things the public thinks a brokerage pays for on behalf of an agent — don’t forget the marketing expenses!
Think about the several thousand dollars for video production, 3-D tours, digital marketing campaigns, specialty websites, broker open house events, the local symphony quartet playing on a red carpet greeting prospective buyers — not to mention the design and printing of brochures and the like.
Yep, this marketing is brought to you by — your neighborhood friendly real estate agent (sorry no corporate sponsor was available), who didn’t ask the seller to contribute one dime, even after agreeing to discount commission to make the seller happy.
And when the seller doesn’t follow the agent’s advice, won’t work with an offer that was received because it was “too low” and ultimately decides to pull the house off the market?
6. A home passes or fails inspection
An inspection is meant to assess the condition of a home. An inspector doesn’t “pass” or “fail” a home.
He or she will provide a report explaining all issues along with a summary of the age of key systems such as plumbing, electric, HVAC and the roof along with an estimate of economic life remaining on those systems.
7. Inspectors have to find something, don’t they?
Speaking of inspections, no one likes the idea of someone crawling around their home for a few hours with a camera and notepad making note of every crack, crevice and things that may not function to a certain standard.
Here’s the deal: inspectors are hired by the buyer to do an independent and objective evaluation of a property. The reality is they are going to find things — no property is perfect, even with brand new construction homes.
There is no secret conspiring happening behind the scenes. If the sellers are concerned about what might be found, the best way to level the playing field is to obtain their own pre-listing inspection before putting the home on the market.
8. Weekends bring out the most serious buyers
Contrary to popular belief, weekends don’t usually bring out the most serious and ready-to-buy buyers. Open houses and other open-to-the-community events tend to bring voyeurs, nosy neighbors and curiosity seekers interested in looking at decorating ideas and how other people live.
Just watch Zillow’s latest web series “Open House Obsessed” that follows people who have made a hobby out of going to open houses.
The most serious showings tend to happen during the week. In many markets, it is usually too late to wait until the weekend to look at any properties of interest.
9. Zillow says, therefore it is
When was the last time Zillow physically walked through a property, pulled relevant comparables, did specific adjustments and established an on-point range of value?
Zillow’s Zestimate gives a consumer a general idea of the value of a home — the company calls it a “starting point” — but by no means is it an exact valuation tool. Zillow can’t discern the difference between why homes on one street or in a particular area may be different value-wise versus those just two streets over.
It can’t tell the consumer why the last three sales sold for the prices they did and why a particular school is driving people to a specific neighborhood. Even Zillow’s CEO, Spencer Rascoff, sold his home for 40 percent less than the Zestimate showed in 2016!
10. It is better to price a home on the high side as the seller can always come down
This is one of the most common fallacies in real estate. Sellers want to protect their asking price so they think overpricing it is an effective defense mechanism against selling too low.
Newsflash: overpricing your home often leads to the home sitting and not receiving much interest. If a home is priced competitively from the beginning, the chances of attracting optimal traffic from the beginning greatly increases.
As a follow-up to this myth, sellers often say “well, a buyer can always make an offer,” but the problem is that when you’ve overpriced it, buyers may not look at the home in the first place, let alone put an offer in. You have to entice with the price.
11. When making an offer on a home, you need to start with a low offer
Just as sellers make a classic mistake of overpricing, buyers often make the mistake of wanting to start with a really low offer.
Although there is nothing wrong with negotiating, if the home is priced within range, an unrealistically low offer is only going to alienate the seller, and you won’t be taken seriously.
Don’t be surprised if you receive a very slight counter or no counter offer at all.
12. The longer a home is on the market, the more negotiable the deal
Not necessarily, and in fact, it may mean just the opposite. A home that lags on the market is likely sitting due to its asking price as well as its lot, layout, location or condition of the home.
An awkward layout or inferior location can also play a role. The seller may be unrealistic about their asking price or want the market to pay more than it is willing to bear.
13. Multiple price reductions mean the seller is desperate to sell
If a home has had multiple price reductions, that must mean the seller desperately needs to sell.
Price reductions are made to bring the property in line with current comparables, price it to be competitive or underprice it to help generate more traffic and interest.
Often when a seller has done several price reductions it means they are through with negotiation.
14. Multiple offers give the sellers an advantage
If a seller receives more than one offer and elects to simultaneously counteroffer all buyers, that increases their leverage and the likelihood of selling for top dollar.
Maybe but maybe not.
It can be easy to see dollar signs when there is more than one offer in hand from multiple buyers. Keep in mind that every buyer has a limit, and no one likes to be played.
Not every home is a must-have in every market, and there will always be another property that becomes available.
As a seller, if you play this card wrong, you could end up having the entire situation backfire and be forced to watch all the buyers walk away.
15. All agents are the same
Although the general process of buying or selling and the ensuing chain of events are similar, no two agents are the same, nor is their approach to real estate. The public often lumps all agents into the same bunch and considers them a commodity without really taking the time to study the differences in their approach, presentation and achievements.
As in every profession or organization, there are those who are committed to excellence, devote endless amounts of time and energy into working with buyers and sellers and are highly adept problem solvers. Others simply march to lower standards and do the bare minimum to get by.
Just as some attorneys and physicians are better than others, so are real estate agents. Some are more resourceful, responsive and creative.
Although a few photos and minimal listing description may be adequate in the eyes of one agent, another agent can’t imagine presenting a listing that wasn’t properly prepped for sale with staging, video, 3-D and a slick marketing campaign with professionally designed and produced collateral for digital and print.
In real estate, an agent can never assume, and the same goes for the public.