Myths, fables and fairy tales are stories with a purpose. They try to to explain the way the world is, and over time are expanded, elaborated and of course embellished. There are myths that surround almost every aspect of our lives and home buying is no exception. Although they might not be “magical” in nature, they do include a fair amount of hyperbole.
If you are currently in the market to buy a home (or will be in the near future) below are a few of these myths that we encounter every day. The uncertainty of our current economic situation and the overall condition of the housing market elevates these to new heights. Although they might not be “magical” in nature, they do include a fair amount of hyperbole. But what’s important is sifting the myths from the truths and only concentrating on the truths.
Listening and following myths can actually harm your home buying efforts, including costing you extra – and that’s not a myth. Here are some myths that need exploding.
You need a high credit score and big deposit to gain a mortgage. Our recent experience has been that while it is harder to secure a mortgage, it’s by no means impossible. People with only moderate credit scores and a 5% deposit are finding lenders. Look hard and you’ll find a lender willing to take you on – just be prepared to provide more information that you previously thought possible! Even people who have had a bankruptcy within the last several years can find lenders will to at least speak with them.
The longer a house has been on the market, the lower the price. This is definitely not true. Sellers will sell at a price they can live with. Most have come to accept the current state of the real estate market. Submit an offer that’s very low and you can expect a rejection fairly quickly – even in today’s highly competitive environment. The value a seller accepts will depend on what is motivating them to sell, and how much they still owe on their mortgage. It’s often as simple as that.
Foreclosed homes are cheaper. On paper, foreclosed homes do appear to be a little cheaper – however, in many instances, you are buying the home ‘as is’. This means there are no contingencies when it come to damage and repairs that are normally applied to home sales contracts. If you have to do those repairs yourself, the cost could well gobble up all the money you saved by buying a foreclosed property.
Just wait, the price will drop. It could – prices drop all the time. However, smart buyers can be quick as well, which means that while you’re waiting for a price drop, someone else could be at the counter negotiating a sale. If you find a home you really like, start the contract discussions early. Prices are not dropping all of the time. This is especially true in the great Portland area. A quick look at home prices so far this year will verify that. In fact, when homes are priced a competitive levels, remember the old saying, he who hesitates is lost. Find a home, make a realistic offer, and you’re halfway along the home buying prices.
Rather than listening to myths, it is best to have a good grasp of what market prices are really doing, what the overall inventory looks like and most importantly a good understanding of why your buying power and thus your leverage really is before you write the first offer.
Michael, along with his wife Laura, is co-owner of Maine Home Connection, an independent real estate company located in Portland. Maine. Together they started the brokerage from scratch with a new vision of what a company could look like if it focused completely on the needs of our clients and our agents.