Four House Selling Myths

When it comes to the real estate market, there’s a lot of misinformation out there. Bad information can cost you money and waste your time when trying to sell a home. Don’t fall for these common real estate myths.

Myth 1: You need to spend money to make money.

Looking to sell, many people mistakenly believe that they can add value to their homes by binging on renovations and upgrades. Sure, an addition to the garage or a sunroom can make your home more attractive to sellers and boost the asking price a little, but that doesn’t mean you’ll make back the money that you’ve spent. In fact, major renovations rarely pay for themselves and often end up costing the seller a pretty penny. The real estate website Zillow looked at various renovations and found that many will only net you between 60 and 80 percent of what you paid for them. Even the most desirable renovation like a bathroom or kitchen remodel are basically break-even upgrades. Rather than dump a bunch of money on a home you’re trying to sell, stick to small improvements like a fresh coat of paint or some basic lawn care, and leave the major renovations to the new homeowners.

Myth 2: You need to wait for the right season to sell your home.

Many would-be sellers wait months and months to list their houses because they’ve been told that spring and summer are the hot seasons for home sales. The idea of spring as the prime real estate season began because parents waited until the end of the school year to move and wanted to get into a new home before the next school year began. But home sales are no longer driven mainly by young families with school-aged children. Childless homeowners like retirees looking to downsize and twenty-somethings looking for their first home have shifted the buying season, making fall and winter just as competitive, if not more so. So if you’re planning on selling your home, don’t wait around for the right season; get it on the market now.  

Myth 3: Pass on the first offer and wait for something better.

When the first offer comes in and it’s below asking price, many sellers make the mistake of passing in the hopes that they can land a better offer later. The problem is, the first offer is sometimes the only offer and weeks later the homeowners are kicking themselves for their mistake. If a home stays on the market for more than a month or two, buyers start to sense weakness. As those “days on market” numbers tick up, buyers will make increasingly stingy offers, betting on the possibility that you might be desperate to sell. Take every offer seriously and don’t reject the first one assuming something better will come down the road.

Myth 4: You can move your home with an open house.

People often have an overly optimistic view of open houses, thinking the best way to sell the home is with volume. By flooding your home with curious lookers every Saturday and Sunday, you’re sure to land a buyer, the thinking goes. The problem with open houses, however, is that they often attract window shoppers rather than serious buyers. With one-on-one sales, your real estate agent can screen out those without a pre-approval letter from a lender, so you don’t waste valuable time trying to sell your home to someone who can’t get a mortgage. They also spend more one-on-one time with a potential buyer, making it easier to really talk up the place and connect with the prospective homeowner. Sure, open houses can can help stir up interest, but don’t rely on it to seal the deal.

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Buyers: Window of Opportunity Still Open

The Fed recently announced they would continue their current pace of purchasing bonds until the economy was stronger. This bond purchasing program is the reason that mortgage interest rates are at historic lows. Rates began to increase over the last several months just on the anticipation that the Fed would announce that they would be reducing the level of bond purchases last month. When that didn’t happen, rates actually decreased (4.50 to 4.37).

That was great news for any buyer in the process of purchasing a home. However, this window of opportunity is expected to close in the very near future as most experts expect the Fed to taper the bond purchasers in December. Even Ben Bernanke, Chairman of the Fed, suggested that the Fed could still scale back the stimulus this year. He stated:

"If the data confirms our basic outlook, then we could move later this year.”

Where will mortgage rates head in 2014?

The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors have each projected that the 30 year fixed rate mortgage will have interest rates in excess of 5% by this time next year. The average of their four projections is 5.3%. The table below shows the impact this will have on the monthly principal and interest payment on a $250,000 mortgage:

 A buyer should take advantage of the current window of opportunity before it is too late.

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