By Brian Petersheim
For the past 10 years, I have helped many people buy and sell their homes. Some clients have been seasoned investors, while some have been first time homebuyers.
Over the years, I have had clients ask me real estate questions about something that they “heard from a friend” or read on the Internet. The problem is, many people don’t know if it is true or just a myth? One of my favorite clients simply put it in the following quote … “Brian, I just don’t know what I DON”T KNOW!”
I had answered all her questions, but she just wasn’t sure what else to ask. Below you will find clarifications on some common real estate myths to help that will hopefully ease your mind as you begin your buying and selling process.
Myth: The seller must disclose to me if someone has died in the home (natural or unnatural death)
Different states have different laws, but in Arizona the seller does not need to disclose a death in the home, but the seller is obligated to tell the truth if the question is asked. Always put the question in writing. The 10-day inspection period is not only to have the inspection done but also it is the time that the buyers can research any and all concerns about the home/neighborhood/surroundings that are important to them.
Myth: Looking for homes is the first step of the buying process.
Getting prequalified for a home with a lender is the first step. In order to write an offer on a home, a prequalification must be submitted with the offer. A prequalification is generally good for 120 days, and can be updated very easily. It is definitely best to have it ready in case you find THE home so you are able to make a solid offer on it within hours! Being prequalified will tell you the price of the home that you can look for and approximate payment. For many people this may be the largest purchase of their life; being prepared is essential.
Myth: I can’t buy a home because I had a foreclosure or bankruptcy in the past seven years.
It really depends on the type of loan that you are applying for, but generally it has to be two or three years after foreclosure/short sale or bankruptcy.
Myth: My home will sell for $xxx,xxx because the Zestimate from Zillow told me.
Although Zillow is a tool in the arsenal of home selling, a local expert can give you an optimal list price and will have comparable sales to back it. Zillows estimates are sometimes off 10-12 percent in the Phoenix Metro area.
FUN FACT: The CEO of Zillow sold his home for 40 percent less than the Zillow estimate. Pretty bad when your own company can’t get your personal home value right.
Myth: I can’t buy a home because my credit score is under 620.
FHA Government backed loans will allow a FICO score of 580. Many reputable local mortgage companies will help you improve your credit score free of charge. In many cases, increasing the credit score is done free and quickly by local lenders.
Myth: A home either passes or fails an inspection.
The buyer’s inspector will find items, even in a brand-new home. The inspector will generate a list of items that are in need of repair, items to monitor or items that are nearing the end of their life span. The buyer will then have the option to accept the premises, cancel the sale or request a list of items to be repaired and the seller must respond. (Generally the buyer will have 10 days from the date of contract acceptance to have the inspection completed and the list of requested repairs submitted) unless otherwise stated in the contract.
Myth: The home that I am selling does not need to be “prepped for sale”
Just like a job applicant shouldn’t go to an interview in shorts and flip flops, the home should not only be prepped for the photography process (Thousands of people may see the pictures online and, if it doesn’t look inviting, they will never make it through the door.) but it should be “show ready” in a couple of hours. This does not always mean brand new carpeting and paint job, but decluttered and clean.
Myth: I will need 20 percent down plus closing costs to buy a home, and I don’t have it.
There are several different loan programs to choose from with different percentage down requirements. Your lender may offer you several options of loans to choose from and you will be able to choose what makes the most sense for you and your goals. If the home will be a rental property or a vacation home, a higher down payment may be required. Programs such as Chenoa, Home Plus, Pathways to Purchase are state/federally endorsed Down Payment Assistance Programs (DPAs) that can cover all down payment required. You also have the option to ask the seller for closing cost assistance.
Myth: The highest price is always the best offer.
That is unless the best offer isn’t the highest. It may be in the seller’s best interest if the second-highest offer is a cash offer, that can close escrow 20 days earlier, and the buyers waived the inspection. It is best to have your agent put the offers side by side and review them with you in order to find the best offer that meets your goals. Ask your agent to reach out to the lender on the prequalification form attached to the offer.
Myth: I need to sell my current home before buying.
This isn’t always necessary. There are actually a couple of common options. First is to rent out the current home. The income generated from the rental may be used as income with the new home purchase. Second, you can close on the sale of your old home and the purchase of your new home on the same day. Planning must be involved with all parties on the same communication page, but a good real estate agent can make it work. The key to option two is confirming that the lender and title company are able to do simultaneous closings.
Myth: I want to buy an Arizona home and my lender in the state I currently live in can do a mortgage for me.
As long as they are licensed in Arizona, but I would strongly recommend they speak to a local lender also. An out-of-state lender may not have access to Arizona/Regional specific loans that local lenders use on an everyday basis. A lender’s job is to get the best deal for a client and knowing about the regional down payment assistance programs may make a huge difference for the buyer.
Buying a home is a major financial decision so it is important to arm yourself with the facts and ignore the myths. A licensed real estate agent and mortgage lender can give you the most accurate answers to your questions and can help ease the stress one naturally feels during the home buying process.
Any questions or comments, please reach out.
Brian Petersheim is a Realtor at HomeSmart Success.