Real estate myths: Separating facts from fiction.
Category Residential Property
Whether you're a first-time homebuyer or experienced seller, there's no shortage of real estate misinformation circulating out there, much of which has become enduring and often thought to be cast in stone.
This is according to Arnold Maritz, Co-Principal of Lew Geffen Sotheby's International Realty in Cape Town's Southern Suburbs, who adds: "Many aspects of real estate are still shrouded in myths and misconceptions that can mislead both buyers and sellers, sometimes even resulting in costly mistakes.
"From assuming you need a perfect credit score to buy a home, to thinking kitchen renovations always pay off at resale, it's common for buyers and sellers to fall prey to fiction masquerading as fact."
Maritz says that navigating the property market with accurate information is crucial for making informed decisions and avoiding pitfalls along the way and in order to do so, one has to separate legitimate real estate wisdom from the tall tales.
The following are the most common real estate myths that need to be debunked:
Myth 1: Spring/Summer is the Only Time to Buy or Sell
Fact: While these seasons are traditionally seen as prime times for real estate transactions, it's not the only window for a successful sale or purchase. The idea that spring is the best time is driven by the perception of better weather and more kerb appeal, however, each season has its advantages.
For instance, during winter, there may be fewer listings, but this also means less competition and one can stage a property to look cosier, warmer and more inviting during the colder months. Buyers who purchase in the off-season might also find better deals and more motivated sellers.
Myth 2: Renovations Always Increase Home Value
Fact: Not all renovations guarantee a return on investment. Some improvements, like kitchen remodels or bathroom upgrades will often yield higher returns but others, such as luxury upgrades or personalised modifications, may not add any significant value and could even deter potential buyers.
It's essential to research which renovations are most likely to pay off in your specific market and avoid over-improving beyond the neighbourhood standard because if you over-capitalise, you are unlikely to recoup the spend and gain the potential returns.
Myth 3: You Need a 20% Deposit to Buy a Home
Fact: The 20% down payment is a common benchmark, but it's not a strict requirement. Depending on your credit history and other considerations, lenders will often accept lower deposits and sometimes even 100% bond for qualified buyers.
While a larger deposit can reduce monthly mortgage payments and ease your long-term financial burden, buyers should explore all financing options and choose the one that best fits their financial situation.
Myth 4: Selling Your Home on Your Own Saves Money
Fact: For Sale By Owner (FSBO) can seem like a cost-saving option by eliminating agent commissions, however statistics show that FSBO homes often sell for less than agent-assisted homes. Without professional marketing, negotiation skills, and market knowledge, sellers might miss out on potential buyers and fail to price their homes correctly. The process can also be time-consuming and legally complex, adding stress and potential risk.
Myth 5: Overpricing Your Home Leaves Room for Negotiation
Fact: Overpricing a home can - and often does - backfire. It can deter serious buyers, prolong the time your home stays on the market, and eventually lead to price reductions that make buyers wary and wonder what is wrong with your property.
Pricing your home competitively from the start generates more interest, attracts serious offers, and can even lead to bidding wars. An experienced real estate agent can help you determine the optimal price based on market conditions and comparable sales.
Myth 6: You Must Make Major Upgrades Before Selling
Fact: Small improvements can sometimes make a bigger impact than costly upgrades. Simple actions like decluttering, a fresh coat of paint on the walls and enhancing kerb appeal can significantly improve your home's attractiveness to buyers.
Major renovations should be considered carefully, as they may not yield a proportional increase in the sale price. Consulting with a real estate agent can help prioritise which changes will be most beneficial.
Myth 7: All Real Estate Markets Are the Same
Fact: Real estate markets vary widely by location and are influenced by local economic conditions, housing inventory, and buyer demand. National trends provide a broad overview, but they might not reflect what's happening in your specific area. Local market knowledge is crucial for understanding pricing, competition, and the best strategies for buying or selling.
Myth 8: Always Buy the Biggest Home You Can Afford
Fact: Just because a lender qualifies someone for a huge mortgage doesn't necessarily mean they should max out those limits. This outdated 'bigger is always better' myth has left some buyers feeling house poor and struggling to maintain and pay bills for more home than they truly need.
It's advisable to set a purchase budget based not just on approval amounts but long-term affordability, including anticipated maintenance costs, tax increases and other expenses. Buy for the lifestyle you want, not just the payment you can technically afford.
Myth 9: You Should Always Buy Instead of Rent
Yes, buying property is a sound investment and has many advantages, however, automatically assuming buying property is a smarter long-term investment than renting is flawed thinking because it very much depends on your current financial situation, future plans etc.
For instance, if you're thinking of travelling extensively for the next few years, renting is probably a better option as it provides flexibility, avoids tying up large sums in a deposit and saves you from making a big financial commitment to which you are bound. There's no one-size-fits-all answer, it depends on your specific life and financial circumstances. Don't succumb to the pressure that you absolutely must buy.
"Real estate transactions are significant financial events, and having accurate information is key to navigating the market successfully," says Maritz.
"And doing your homework and partnering with experienced, trusted real estate and lending professionals is the surest way to separate fact from fiction and make informed decisions."
Author: Property24
