Things You Probably Don’t Know About Real Estate – Part 3
This is the final installment of a three-part series to clear up common misconceptions about real estate.
You do NOT have to pay the seller's asking price
You may pay more; you may pay less. As a buyer, you’ll need to determine what the home is worth to you and what you can offer that will give you the best chance of a seller’s acceptance. Ask your REALTOR to provide you with comparable sales in the area to get a sense of what houses like this are going for. In most cases, you’ll likely pay something close to the asking price.
In some situations, a home may be priced below market value, either because the seller misdiagnosed the value, or because the price was deliberately set below market to generate a bidding war when the time came to sell.
Never pay more than you think the property is worth to you and be careful of bidding wars or auctions. It is easy to get sucked into the competitive nature of a bidding war and overpay, either paying more than market value or simply more than you were prepared to spend.
Sellers do NOT always cover closing costs
Closing costs are negotiable. Buyers often pay, but they can ask sellers to cover closing costs to conserve cash for the down payment and/or repairs. This usually results in a commensurate price increase.
You do NOT need a full-cash offer to win in a hot market
Do most sellers like a full-cash offer? Sure! But all sorts of factors can make an offer competitive, including price, financing contingencies, close-of-escrow timeline, and seller leaseback options. Each transaction is different and your REALTOR can guide you through these situations.
Refinancing costs money, but can save money in the long run
Refinancing usually costs 2%–5% of your loan amount; however, if rates have dropped and/or you have many years left on your loan, refinancing can lower monthly payments saving you significant money in the long run.
Skipping an inspection may actually cost you money
Inspections are a small price to pay for the money they can save you. Typically, they cost $300–$800 on an asset worth hundreds of thousands, so for less than $1,000, you find out whether the property has any major problems. Armed with this information, you can renegotiate price or at least know what you’re in for once the house is yours.
Even new construction should be inspected. I once had a pest and fungus inspection on a brand-new home, and the contractor thought I was crazy to waste the money. Come to find out that wood scraps had been left under the house, which could have turned into a termite buffet.
It’s not a bad idea for homeowners to get a pest and fungus inspection every 5–10 years, even with no plans to sell. It’s amazing how much damage pests and fungus can do in a relatively short time.
Buyers do NOT pay their agents out of pocket
Usually, the brokerage fee for REALTORS is added to the home's value for appraisal purposes, making it financeable.
If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 50 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.
Check out this article next
