As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents' house-hunting experiences. Maybe they've learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized "real estate myths." Here are three such myths that many less-seasoned home buyers and sellers assume are true.
Myth No. 1: Spring is the best time to sell a home
Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn't necessarily the best time to sell a home anymore.
The reality: The best time to sell is during the holidays and right after
Today, more than half of buyers aren't married, and their decisions aren't based upon school schedules. So spring isn't as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.
It’s a supply-and-demand issue. Most sellers assume buyers aren't seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.
After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn't even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.
Myth No. 2: Always start with your lowest offer
There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying "never offer the full asking price." That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.
The reality: A low offer may get you nowhere fast
A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent to understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.
Myth No. 3: A cash offer trumps all
There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.
The reality: A savvy seller may be more tempted by a solid financed offer
Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.
A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.
Learn your market
When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.