Debunking Popular Real Estate Myths
By Lisa Scontras
Like urban legends, misconceptions about real estate often take on a life of their own. Many widely held beliefs have little to do with actual facts. So what are the answers? Should you avoid leasehold like the plague? Price your property with a cushion so you have room to negotiate? Zero in on buying a foreclosure?
The following is a bit of myth busting on real estate falsehoods the truth of which may surprise you. It’s a good reminder that for sound real estate-success strategies, it pays to ask a professional.
I have to list my home for more than I really expect to get for it, in order to build in room to negotiate with the buyer.
While many sellers believe this to be true, overpricing your home can actually cost you money in the long run. In fact, setting a list price that is too high may significantly reduce the number of buyers who look at or even consider your home.
“A typical seller wants to list his property at a higher price, anticipating lower offers, leaving a cushion to negotiate,” says Susan Onishi, Realtor and partner with Prudential Locations. “However, research shows that when a property is overpriced, the best sales opportunity window is missed.”
She says buyer interest is at its peak during the first three weeks a house is listed.
“Setting a realistic market price will attract the largest number of qualified buyers, which in turn could lead to multiple offers yielding the highest price possible in the shortest amount of time.”
Onishi’s colleagues at Prudential Locations agree and further elaborate.
“Overpriced listings help other listings to sell,” says Realtor and partner Kumiko Burns.
“Price it right and sell now,” adds Corinda Wong, Realtor and partner. “Overprice your home and you may be on the market longer, ultimately reducing the price to lower than it would have been had you priced it right from the beginning.”
I should avoid buying leasehold property altogether.
Leasehold was initially popularized after World War II to give buyers the chance to purchase a home at a reduced price while allowing landowners to retain the rights to the land. Today, many leasehold properties have few years left on their leases and may not be what many buyers are looking for. That doesn’t mean there aren’t some surprisingly good leasehold buys out there.
“There are leasehold properties with good terms,” says Burns. “For instance, Waikiki Skyliner has low-fixed, low-lease rents until the expiration year of 2058. Nobody is interested in buying the fee in this project. Because of the leasehold situation, prices are more affordable.”
Wayne Nishida, a Realtor and partner at the firm, says it’s worth looking at what the cost is to buy the fee. Depending on how the numbers crunch out, “a buyer could simultaneously acquire a leasehold property at a very attractive price together with the leased-to-fee interest.”
The best deal on a home today is buying a foreclosure.
You assume a lot of risk when buying foreclosures, according to Wong. There may be some deals, but there also is a lot of heartache.
“Foreclosure is more buyer beware,” says Wong. “You agree to buy the property at an auction without the full advantage of disclosures and home inspections.”
“Sometimes foreclosure properties require too many repairs, and buyers may not be able
to afford to make all the necessary repairs,” adds Nishida. “There may be better opportunities for buyers in situations where a homeowner is being transferred out of state or when the sale of a property fell through and the property is back on the market.”
Foreign buyers are showing up again and making cash deals.
Recently, this has become fact. Though foreign sales are not through the roof as they were in the 1980s, they are on the upswing particularly among Japanese buyers, Burns says.
“Yes, they are looking for the properties to invest as the exchange rate is extremely favorable to them. The younger buyers are educating themselves online beforehand and can make quick decisions,” Burns explains.
Since market conditions are always changing, making what may have been true in the past become myth today, there is one fact that remains constant: Whether buying or selling real estate, hire a professional because there is too much money at stake to make mistakes.