7 Commonly Held Real Estate Myths

I'm often surprised, and occasionally amused, at the many real estate myths that continue to exist. Many people believe all of them and yet most of them need some deeper thought before being adopted wholeheartedly. Below I’ll present seven of the most commonly held myths.

Myth #1 - Never buy the most expensive home in a neighborhood.

What a home is worth “to you” is what is important. Think about it. At any given point in time, some home has to be the most expensive in that neighborhood. If there is a good reason why it is the most expensive and it meets your needs and desires perfectly, consider adjusting your view of it. Maybe you are looking at a neighborhood where people are buying up older homes and substantially enlarging, remodeling, or even replacing them. Some neighborhoods are active “tear-down” neighborhoods where nearly every home sale is a home about to be torn down and replaced by a much larger, more elegant home. So you may find a neighborhood where a home that has been redone completely already is priced above those that have not yet been updated. If you are prepared to live in the home for a number of years, ask yourself, “what will the neighborhood average price be in 2 or 3 years after most of the homes have been updated or replaced.” You may be looking at a bargain today.

Myth # 2 - Upgrades suggested by a builder always add to the resale value of the home.

Not true. What is true is that upgrades add to the profit the builder will make on the home. Whether a given upgrade adds resale value to a home depends upon how popular that upgrade is with buyers. For example, solid-surface counter tops like corian or granite are very popular with buyers today. Adding a closet to a room so when the home is resold that room can be classified as a bedroom will probably add value when the home is resold. Conversely, paying extra for the latest color appliance may not. Generally it is smarter and frequently less expensive to choose the most neutral appliance, wall and carpet colors. Some other upgrades cost much more than they will add to the resale value of the home. An experienced Realtor can provide you with this information.


Myth #3 - If an existing home has been on the market for a while, something must be wrong with it.

Usually, what was "wrong" with the property is that the price was higher than any buyer was willing to pay. When people sell their homes, especially if they’ve lived in it for some time, they tend to over-estimate its worth. This is caused by the fact that they “appreciate the home the way it is.” That doesn’t mean anyone else is going to be equally infatuated by it.

Time on the market is more likely simply an indication that the seller has been demanding more than the property is worth. Take the time to view it. It may also have some cosmetic defects that many people didn’t like but which can be corrected at little cost. An example is a home with way too many colors on the wall, really out-of-date wallpaper, or way too much furniture making the rooms look smaller than they are. A good Realtor should have pointed out these problems and gotten them resolved before the home ever went on the market but sometimes the seller refuses. So don’t refuse to view a home just because it’s been on the market for a long time. You may be looking at a home that has finally been priced correctly or that would be just right for you with just a little effort.

Myth #4 - Price per square foot is a good indicator of whether the price is right.

Price per square foot is an interesting, but marginally valuable metric. "A better metric," says Bob Henley, a Sarasota real estate expert, "would be the 'price per useful square foot,' something you cannot determine without visiting the home. " And, by useful, he mean “useful to you and your lifestyle.”

Some floor plans are very efficient while others have lots of square feet wasted in corridors, excessively large bathrooms, bedrooms or duplicate rooms. Once upon a time every home had to have a living room and a family room, an eat-in kitchen and a dining room. Today many people prefer a more open floor plan where one “great room” may encompass the kitchen, dining area and living area all in one large, open area vastly reducing wasted square footage. It also gives the home a more open feel, something very popular for today’s home buyers.

In addition, a home with extra insulation, double pane windows, a high-efficiency heating and central air conditioning system, and other popular trim and decor upgrades will have a higher cost per square foot and be well worth the extra cost.

Myth #5 - Buying a Foreclosure Property is always a good deal.

Let's define a good deal. A good deal is buying a house for under market value. In many ways, real estate properties act much like common stocks or any other type of asset. The less risk you are willing to assume, the more the asset (in this case a home) will cost. Foreclosure properties involve a lot of risk. That explains why they sell at prices well below other properties sold "at arm's length" in the same neighborhood. The risks you assume in buying a foreclosure property may reduce the market value of the property. If those risks turn out to be less than you had anticipated, you will have made a good deal. If those risks exceed your expectation, you could easily find yourself with a property that is going to cost a lot of money to refurbish impairing it's profit margin -- maybe even turning it into a loss.

Myth #6 - It's always better to get a bigger lot of land.

This one has really changed in recent years. Many buyers today are too busy to maintain a large lot and would just as soon have a smaller lot to care for. Given the busy lives many people lead, there is a trend today, especially in areas popular with retirees, toward “patio homes” where homes sit on very small, easily maintained lots but share larger common “community green spaces.” Unless there is some other reason why you want or need a large lot, there is no reason for you to pay extra to buy a home on a larger than average lot.

Myth # 7 - On a new home, the builder will charge more for the house if you use a Realtor® to represent you.

That is almost never the case. Builders are generally happy to have Realtors sell their homes. According to Janet Dugan, a Sarasota golf course homes Realtor, "generally, builders consider the fee they pay to a Realtor to be part of their "marketing expense", money they'd have had to spend one way or another to sell the home. In almost all cases, the home costs exactly the same whether you use the services of a Realtor® or not.

"In almost all cases," says Rich Stover, a Sarasota Florida real estate agent, "it doesn't cost you anything to have the advice and counsel of a competent Realtor representing you." And, the realtor may know things about this builder that you wouldn't otherwise be able to determine, like his his willingness to negotiate on price, his reputation for repairs after the sale and at what rate this neighborhood is being built-out giving you an idea of how long there will be construction machinery driving past your new home every day.