Myth Busters: 5 Real Estate Myths That Need To Be Busted!

1. Buying new construction without agent representation saves money

This myth is a huge misnomer. Most reputable builders account for the commission as part of their marketing budget. They recognize that working with a real estate agent can be a significant source of business and serious buyers that result in a sale, as opposed to tire kickers that wander in to look at models for design ideas.

It is important for the consumer to remember that the builder represents themselves and only that. In other words, the builder is the seller and any agent from the builder is representing the seller, not the buyer. They are in the business of selling homes and while they may be concerned with delivering a quality product, the term “quality” can be quite subjective and mean different things to different people. Think of having agent representation as your own personal watchdog to ensure that expectations are being managed.

2. I will get a better deal by going through the listing agent

Speaking of representation, many buyers think that if they don’t use an agent to assist them, they will get a better deal on a home they are interested in by just working with the listing agent.

First of all, state licensing laws do not allow an agent to represent both a buyer and seller at the same time. So working through a listing agent means that the only agent in the transaction is working in the best interest of the seller and the seller alone. The listing agent technically has the option to amend their contract with the seller to become a neutral party to both the buyer and seller but any reputable agent would never do that. This would create a precarious professional position as the agent works to get a seller the best terms and price trying to balance that against what is important to a buyer. There is often a disconnect between the two and trying to achieve a fair solution can be difficult with one agent involved. Inevitably, either one or both parties may feel as if they got the short end of the stick which is not the best way to conclude a transaction.

If you come in without an agent to represent you, typically what would happen is the listing agent will refer you out to a buyers agent in their office to draft your offer. The listing agent typically doesn’t keep both ends of the commission like most buyers think. Which means, there is no added benefit for the either the listing agent or the seller to accept an offer from a buyer without representation. In fact, it is much riskier for them. Without an agent, that buyer has not been vetted as a competent buyer by an industry professional. There is no one keeping them on track through the transaction, keeping them informed, meeting deadlines, or giving advice about contingencies, and it’s more likely for the transaction to fall apart. If you are trying to gain a competitive edge, it would be much more impactful to show that you are a strong buyer by using a knowledgable agent to write a solid offer and communicate with the listing agent on your behalf.

Bottom line, if you find a listing agent willing to stay neutral and work both sides of the deal, you may have found yourself an unethical agent. Otherwise you will find yourself entering into the biggest purchase of your life without proper representation at all. Is that worth it to you?

3. I don’t need to stick with the agent I’m working with – it doesn’t matter who I buy the house from

In theory, yes you can buy a property from whatever agent you want. If you started with one agent and they were not a fit for you, you can shift gears to another agent. But in reality, there is an important loyalty when it comes to a buyer/agent relationship from both sides and it’s best to find an agent in the beginning of your home buying journey that you trust and are happy to stick with until the end.

In Wisconsin, we have a Buyer Agency contract. This is our state contract that establishes the client/agent relationship, gives your agent the right to work in your best interest, and allows your agent to negotiate on your behalf. This contract gives you as the buyer true representation.

With that being said, if you have been working with an agent and you just aren’t clicking, then by all means, find a new agent. And even if you have signed a Buyer Agency Agreement, most reputable agents will terminate the contract for you if it’s just not working out between you. But since no one wants to have that awkward conversation, it’s best to try and find the right match from the start. Find someone who you trust and who you enjoy, you are going to be spending a lot of time together!

There are also legal issues that can arise from working with varying agents. If you set up a private showing with one agent and then bounce to a different agent, there will likely be an issue within the realtors association for whom is owed the commission from the sale.

In addition, the real estate community is pretty insular and it will quickly become known in the community that you were the same buyer that has looked at the property five times with three different agents. It may raise some eyebrows as to your seriousness and what kind of buyer you will be to deal with.

Bottom line, respect earns respect. Don’t waste an agent’s time if you are not serious about working with them in the long term.

4. Agents are hungry for business, so of course they will work with me, no matter what I want to buy or sell

Not so much. While most agents are motivated by opportunity, they also recognize that time is money.  One of the most precious commodities that an agent is giving is of their time, and that is often more valuable than money.

Agents want to focus their time on activities that will lead to productivity.  So while consumers may think every agent is waiting to drop everything to run out and show them a property no matter where or what it is, think again. It can be costly for an agent to work on something that is a road to nowhere.

An unrealistic property search looking for the impossible, exhausting every possible option only for nothing to be suitable, results in a lot of lost time. Marketing the heck out of an overpriced listing and leaving no stone unturned, only to result in it not selling, or sellers rejecting reasonable offers, leaves an agent with a lot of bills for photos, video, staging, print advertising and digital ad campaigns.

So no, not every agent wants to continually handle these situations. These are often encounters taken on by unsuspecting real estate rookies who are ripe with hope and desperate for opportunity. Wise agents learn to assess the opportunity cost of every client to determine what is and isn’t viable. If you don’t trust your agent’s advice and are unrealistic with your search criteria or sale, you may end up on the “most unwanted list” that top agents will not want to deal with.

5. Selling my home to an iBuyer will result in a similar price as an open market transaction

Not at all. While it sounds easy to sell your house with the click of a mouse, there is so much more to it than that.

The price an iBuyer is willing to pay is a bargain to them. In most cases not a true reflection of market value.  With property values pushing higher throughout the country and available inventory at an all time low, everyone is looking for an off-market deal. iBuyers are a modern day real estate investor looking for an advantageous situation. Unfortunately, what an unsuspecting seller may not know can hurt them. While selling your home “as is” may be appealing, they will discount the purchase price to reflect that fact, even if potential issues are not that costly to fix.

An iBuyer may go through the home with a fine tooth comb with a host of specialty contractors that find much more than a home inspector would notate with a regular buyer as justification for paying a lower price. There are often a slew of closing fees that an unsuspecting seller does not understand and may not think to question because they are selling their home instantly.

When it comes time for closing, it may be handled by a mobile notary that is not well versed in a real estate transaction like a local title agent or attorney is.  Do you really want to risk your single largest transaction for the sake of convenience?  You don’t know what you don’t know, and it can hurt you.

Leverage and exposure are two elements that always help bring the highest and best price that a property should sell for. On a related note, you can read more about Why Sellers Need An Agent here: https://kohlrealtywi.com/blog/2019/10/31/why-sellers-should-never-fsbo

10 Things Home Buyers Need to Know

Buying your first home is a big decision and it can be a daunting task, but also an exciting journey! Before you dive right in, here are a few things you should consider…

1. Having a Buyer's Agent is so Important (and FREE!) 

Commission to the Buyer's Agent is typically paid by the Seller. Which means that it is Free to the Buyer! So there's no reason not to have someone working on your behalf. Without a contractual agreement between an Agent and a Buyer (called Buyer's Agency), any agent involved in the transaction is by default legally working in the best interest of the Seller. Eek! A Buyer Agency contract creates a loyalty between both parties and ensures that the agent can share advice, pricing details, and can legally negotiate on your behalf. Find someone that you trust and enjoy their company, you will be spending a lot of time together! 

2. Things can get Competitive

Depending on the time of year,  your location, and your price point, things can get pretty competitive out there. There is currently a shortage of listings and a plethora of buyers. You will likely be up against other offers and you might even miss out on a couple houses before you get the winning bid. Houses are moving quickly, sometimes within days or hours from being listed, so when you find the perfect house, you need to be ready to pounce on it! It's important to mentally prepare for this and realize that it's a journey. This is also why it is especially important for you to have a Buyer's Agent on your side to help guide you through the process and negotiate on your behalf, to get your offer to stand out and have the best chance of getting accepted. Talk to me about strategies you can use to strengthen your offer beyond just the price.

3. It can take a while

The timing can really vary so much. I have had buyers that take 1 day to find the perfect home and others that take years. But for most cases, it takes a few months from start to finish until you are in your new home. It's important to see a variety of houses and neighborhoods when you're searching for the right home so that you can gain a frame of reference. But remember, certain times of year, thing can get very competitive and houses sell very quickly. So it’s important to have all your ducks in a row before you start looking so that when you find the perfect home, you are ready to jump on it.  Also keep in mind that, depending on what part of the month you close in, you'll have 1-2 months after closing before your first mortgage payment is due which is important to note so you can avoid having any overlapping payments between rent and mortgage. Discuss this further with your lender. 

4.Get pre-approved BEFORE you start to look

There are so many mortgage options out there, especially for first-time home buyers and not all lenders are created equal (more on that in #5).  You need to know what you are comfortable paying so you can narrow down your search and stay realistic with your expectations. It can sometimes take a little while for your lender to go through the pre-approval process so getting it done ahead of time is important. You will be expected to provide your pre-approval letter when you submit your offer so you need to have one to ready to go. I have seen too many people lose the house of their dreams because they were not pre-approved ahead of time. 

5. A Good Mortgage Lender is key

I can't stress enough how important it is to work with a lender that is responsive, easy to work with, fast, and local! Trust me, you do not want to find out a week before closing that your lender dropped the ball and you can't buy your house! Also, most buyers don't realize that the lender you go with can make or break your offer. Realtors work with a lot of lenders and tend to know the "good" lenders from the "bad" ones. If you are working with a lender that is known for being difficult to work with, unresponsive, or for dragging out financing, they will be much less likely to accept your offer. If you are shopping around, keep in mind that each lender will check your credit. If you keep it to no more than 3 lenders within 2 weeks it should only count as one “hit” (inquiry) on your credit score. Whoever you choose, you will be associated with this lender for many years to come. Finding a lender that is local and reputable is so important (and for the love of God, No Rocket Mortgage!!) A good lender goes a long way in making the home buying journey smooth and easy so ask me for some suggestions on great lenders in the area and those to avoid .. I have a list ;)

6. You don't necessarily need a 20% down payment

It's been drilled into our heads that you need 20% down to buy a house. But that is no longer the case and it's not realistic for many buyers. Some First-Time Home Buyer loan programs offer as little as 3% down and some with $0 down! Some banks require PMI (private mortgage insurance) for less than 20% down and some don’t (depending on your credit score). Your amount of down payment, your interest rate, and your price range will all affect your monthly payments. So make sure to ask questions and work with a lender to crunch those numbers!

7. Consider your Lifestyle and Future Plans

How long do you plan to stay in this house? Is this your forever home or your starter home? Do you need to be a certain distance from work? What amenities would you like to be near? … If you plan to move in 3-5 years, consider re-sale value. If you plan to have kids soon, consider schools (but also keep in mind that you'll have at least 5 years before your new baby grows into a school age child). If you plan to do a lot of traveling, maybe consider a condo instead. If you plan to have dogs, think about whether or not the neighborhood allows fences. All good things to think about! Check out my Neighborhood Guide for a comprehensive list of Madison neighborhoods and surrounding suburbs to get a feel for the vibe and the price range of each community.

8. Be Willing to Compromise

I have never met a couple that agrees on every aspect of the house they are looking for. And even without having to agree with each other (or if you are buying a home on your own), you might need to compromise on your own expectations. Are you willing to live a little further out of town? Sometimes an extra 15 minute drive can get you more options and more bang for your buck. Are you willing to do some updates yourself? Do you really need that fourth bedroom or could you make three work? Think about the things that matter most to you and your deal-breakers, and then think about what you can be flexible on. The “perfect” house doesn’t exist, even if you build from scratch, but we can get pretty darn close.

9. Don’t forget about the “other” costs

Buying a home has more costs than just your down payment and monthly mortgage payments. Once you find the house of your dreams and get an accepted offer you will need to send earnest money (typically 1% of the purchase price). Then in the next week or so you will need to pay for the home inspection (typically $400-$500) and any other additional inspections that are necessary for that particular property (ie: fireplace, radon, pool, well, septic, etc). Then there are closing costs with your lender which include the home appraisal, processing fees, etc. It’s also important to make sure you are accurately budgeting for the costs of owning a home. On top of your monthly mortgage payment you will have your home owners insurance and property tax payments (often escrowed). In fact, the first full year of your home owners insurance is typically paid up front at closing. And don’t forget about higher utility bills. You can usually look up average costs associated with a specific property to get an idea. You might also want to consider a Home Warranty. Often paid for by the Seller but not always. It’s usually about $500 up front and would cover appliances and mechanicals (after a small deductible) for the first year if they were to fail. In general, budgeting around $5000 should be enough to cover closing costs and pre-closing payments throughout the process. But speak to your lender to find out your specific closing cost amounts and to discuss if you qualify for assistance. 

10. Most Importantly… ENJOY the Journey!

With all of the big joys in life comes a little chaos too and it's important to embrace it and enjoy the ride. Whether you are planning a wedding, getting a new puppy, having a baby, or traveling the world, all of these joys come with a little bit of stress. Finding your new home is no different. For most cases, the journey takes a few months from start to finish until you are in your new home. The process can be stressful at times especially when there is competition involved. Knowing what to expect and having a good attitude going in to the process can make a huge difference. Fulfilling your dream and finding your home is worth every second. So enjoy the journey, no matter how crazy it gets, and enjoy your new home!

Why you need a Realtor to Sell your Home

Every year, a small portion of homes are put up for sale by the owner (FSBO). But according to the National Association of REALTORS® (NAR), FSBOs will have a far more difficult time getting off the market and will typically sell for much less. Here’s a few reasons why hiring an agent can save you time, energy, unneeded stress, and money.

You’ll SAVE money with a Realtor (yes, really)

The number one, and usually only, reason that a homeowner wants to sell without an agent is to save money. But this is a common and very costly misconception. The realty is, FSBO homes sell for an average of $40,100 less than a house listed by a professional. That is quite a bit more than the 3% you *think* you are saving. FSBO homes also sit on the market much longer and typically end with a ton of stress, costly mistakes, and in the end need to be re-listed on the MLS anyways. Read on to learn more ways you are better off with an agent…

Advocate For You

Agents are required to have your best interest in mind, which can be a breath of fresh air during a particularly stressful process. It’s always beneficial to have an expert opinion to back you up and marketing expertise to make sure your home is seen by the right people. Without a Realtor on your side, the only agent in the transaction is the agent working in the best interest of the Buyer. When drafting legally binding documents, you are putting a lot of trust in an agent that is working on someone else’s behalf. Plus, your agent will make sure that all parties meet their deadlines and adhere to the contract (more on contracts later). They will also help with your inspection negotiations and know which items are reasonable requests and when it makes sense to push back.

Pricing and Negotiation skills

You need to know how to price your home accurately for the current market. A home that is not listed at the right price from the beginning will take months instead of weeks to sell, if it sells at all. Without having a professional marketing analysis on your home, you could be pricing it too high and scaring off buyers or pricing it too low and leaving money on the table (money you could have used for an agent). Plus, if you do get a buyer to submit an offer despite an accurate price, the appraisal process from the bank might derail the entire transaction if it doesn’t match up. If you don’t fancy yourself an expert negotiator, that’s where a real estate agent comes in. REALTORS® have mastered the art of negotiating and can ensure your home sells for a fair price. A big part of the negotiation process is understanding incoming offers and how to draft counter offers. Keep in mind that the highest offer is not always the best offer. There are many other factors to consider when accepting an offer. For example, who the buyer’s lender is and what type of loan they are approved for can make a huge difference in how smooth the transaction goes. A good agent knows the “good lenders” from the “trouble lenders” and can help advise you. Or how about when there is a Bump Clause attached to the offer or an Escalation Clause. Or a Broker Addendum or Testing Contingency. Choosing between multiple offers can get very overwhelming, complicated, and confusing especially in a busy market where offers are often accompanied by multiple Addendums, Clauses, Additional Provisions, and Contingencies.

Confusing Paperwork

A WB-11 or Wisconsin Offer to Purchase Contract is a 9 page legally binding document. Considering that you have hundreds of thousands of dollars on the line with the sale of your property, I suggest you thoroughly understand what this contract states and what you are agreeing to. Your agent can explain everything to you in basic terms and handle the often difficult process of navigating a real estate transaction. If you make a mistake in your paperwork or word something wrong, it can quickly cost you the sale or, sometimes worse, legally bind you to something you didn’t realize you were agreeing to. You also need to be aware of your legal obligations, including your real estate condition report and disclosures that need to be provided with the listing.

A Neighborhood Authority

Choose an agent with extensive knowledge of the area you live in. Your agent will know the average price of homes in your area, plus extra information you might not be able to find in an internet search. Every neighborhood, and every house within that neighborhood, is unique and needs a specific marketing plan in order to sell for the best possible price. A sellers market does not mean that houses sell themselves. Did your neighbor have a line out their door and multiple offers the first weekend on the market? That’s because it was priced and marketed properly and that doesn’t mean your house will sell the same way or for the same amount. Analyzing “comps” for your home is very complicated and looks at many more variables than just square footage and location. Plus, the real estate market is ever-changing and a marketing technique that worked at one point in time might need to be adjusted even as little as a month later.

Advice and Marketing

A good agent knows what attracts Buyers most and can give advice on things to improve around the house before listing. Anything from wall decor to minor remodeling updates, your agent knows what has the best return on your investment and how to best grab the attention of most buyers. Some agents (me) also include complimentary staging and professional HD photography which are both ESSENTIAL in today’s market where first impressions are formed online at first glance. You want your listing to look like a Pinterest page! And for some properties, drone videos and photography have become incredibly useful for marketing. In addition to a stand-out presentation, having the knowledge of current marketing trends including social media and internet syndication make the world of a difference. Gone are the days where you take a couple quick photos and call it a day. Implementing a marketing strategy across social media platforms, email lists, website SEO, and networking are all essential to selling your home in today’s market and getting the best price possible.

Safety and Vetting Buyers

Have you ever sold anything on Craigslist or Facebook Marketplace? Do you usually meet the buyer at a public location instead of at your home for safety? When you list your home for sale, you are literally opening up your door to complete strangers. Some of these people can pose as interested buyers but actually have ill intent. They may be casing your home for valuables and noting possible points of entry, or worse, have an intent to harm you once you are alone in your home together. Your agent has your safety as top priority and will only allow buyers to enter your home that have been vetted and accompany an agent during the showing.

Bottom Line

You probably don’t have a lot of experience with the ins and outs of real estate transactions and the current market. The industry can be tricky to navigate, but an agent has the education and experience to back up his or her advice.