Don’t let panicked headlines stop you from your dream of home ownership

Everyone has an opinion on why you should or shouldn’t buy or sell a home in the current real estate market, not to mention how to do it.  But not everything you hear is true, especially when it comes to clickbait headlines in the news or doomsday predictions from distant relatives on social media.  Find out the most common myths about the market right now, what you really need to know and the best resources to help you buy or sell with confidence. 

Myth 1: There’s No Inventory 

In many situations, we use an item’s availability, it’s perceived abundance, to quickly estimate its worth.  This notion of scarcity has created an atmosphere of fear among home buyers and sellers. 

On the national level, there is some truth to this statement.  According to The New York Times, inventory in major metro areas such as Atlanta, New York City, and Chicago is about half of what it was at this time last year.  But in Colorado Springs and the surrounding areas, more homes have been bought and sold in the last six months than the same time period in the previous year, and we are on pace to break records in volume of home-buying activity.  What IS true is that homes don’t stay on the market for long, and it’s best to have access to the MLS portal through your local REALTOR to see listings as soon as they appear.  The early bird at least has a shot at the worm in this market. 

Myth 2: It’s So Easy to Sell in this Market, Anyone Can Do It. 

The impression in a hot market is that buyers are ready to jump at the first home that comes up for sale, and no marketing is needed.  Therefore, why pay anyone a commission if the house will essentially sell itself?  Although it might be true that there are plenty of buyers, sellers should not forego the expertise of a professional just yet. 

In a fast-moving inventory environment like our current market, buyers are more likely to use an agent to locate homes for sale either before they come on the market or immediately upon listing.  Most of the time, agents are looking on the MLS or talking with other agents in order to find new listings for their buyers.  Some ambitious agents might search want ads or Craigslist, but they are typically the exception rather than the rule.  For the most exposure for your sale, you still want to hire an agent to correctly price your home and advertise it in a way that takes advantage of the multiple buyers that are out looking. 

Myth 3: I could Sell, but Where Would I Go?

Before you begin the process of choosing the best way to buy a house while selling you own, talk to a REALTOR who can explain your options to you.  Your REALTOR can give you a sense of what your house could list for right now and how fast it is likely to sell. Then, you can discuss your options.  REALTORS are experienced in this kind of situation and can offer scenarios that may need your needs.  While buying with a contingency, which means if your current home doesn’t sell buy a certain date you can back out of the new one, isn’t preferred it is also not impossible to get a contingent contract accepted if the circumstances are right. Because many sellers use the money they make from from selling their home to finance the purchase of their new home, they can often find themselves in a situation where closing dates don’t align, and the money they need from their current home’s equity isn’t quite available yet.  

If you find yourself in that situation, you may be able to use a home equity loan to buy.  A home equity loan is a loan in which the borrower uses the equity in their home as collateral.  The loan creates a lien against the borrower’s house, and it reduces the actual equity the homeowner has in their home.  But it can give you the cash you need to proceed with a new purchase while the old home is on the market. 

If you sell your home and can’t find a new one to buy right away, consider asking for a rent-back clause in the sales contract.  In this scenario, you’ll be able to rent your home back from the new owner for a period of time after the sale closes, up to two months, which gives you extra time to search for a new home while keeping a roof over your head. 

Myth 4: I Don’t Have Extra Cash for an Appraisal Gap Guarantee 

Appraisal gap coverage, often referred to as an appraisal gap guarantee, is when the buyer agrees to cover any shortage between the offer price and the property’s appraised value.  In a hot real estate market, where offers are over asking are the norm, writing this into your offer is a great strategy to beat out the competition. But your REALTOR can guide you to homes that may not be subject to multiple offers with the big appraisal gaps, such as homes that have just reduced their list price, homes that have been sitting on the market longer than average and homes that have fallen out of contract and are back on the market, among other situations. 

Myth 5: I Don’t Have 20 Percent to Put Down For my Loan

The idea that you have to put 20 percent down on a house is a very pervasive myth.  In fact, the average first-time home buyer puts just just 6% down, and certain loan programs allow as little as 3% or even zero down.  You shouldn’t think it’s conservative to make a large down payment on a home, or risky to make a small down payment.  The right amount depends on your current savings and your home buying goals. If you can buy a home with less money down and become a homeowner sooner, that’s often the right choice.  Your REALTOR can point you to lenders with many loan options who can help you find the right financing for your circumstances.  

In addition, this fast-moving market has seen many deals fall apart before they get to the closing table.  As many as a third of all homes that go under contract are falling out of contract and not getting to the closing table. Your REALTOR can ensure that your transaction is smooth and, most importantly, complete, by watching for red flags that can indicate trouble and work to protect your interests.  If you are looking to buy or sell, contact us today to discuss the opportunities you have in today’s Real Estate market.