I recently came across an article, “The Worst Home Buying Advice I Ever Received” by Sheiresa Ngo over at the Cheat Sheet.

An inspiration for the article came from a survey conducted by NerdWallet, as reported by Deborah Kearns, that found:

“nearly 49% of homeowners said they would do something differently if they were to go through the home buying process again. Another 42% said they found the home buying process to be quite stressful.”

The Cheat Sheet decided to ask some professionals to offer up some of the worst real estate advice they had ever heard.

Interestingly, amongst all of the bad advice shared, there is some really good advice.

Here are some of the answers that stood out:

Worst Real Estate Advice: Don’t Buy. Real Estate Will Crash Soon

“I would encourage home buyers to buy as soon as possible. He who bought real estate never lost. The value of your money is going down every day due to inflation.

If you wait around for real estate to crash, remember your dollar is getting weaker and weaker while you wait.

So even if real estate prices go down slightly, during the time you waited the value of your money goes down, too, so there’s no point in waiting.”

Jesse Harrison, founder, Zeus Legal Funding

Worst Real Estate Advice: Don’t Use A Buyer’s Agent

Some people will advise home buyers not to use a buyer’s agent. They reason that the seller will save on the commission, and you’ll be able to get a lower price.

Why this is bad advice:

“The commission is negotiated by the seller and the listing agent before the buyer ever enters the picture.

The seller has already agreed to pay the listing agent a specified commission — hypothetically (because it’s all negotiable) 6%.

The seller will pay that whether the listing agent also finds the buyer or whether the buyer is represented by his or her own agent.(Agents love it when the buyer is unrepresented — they get the entire commission, rather than having to split it with a buyer’s agent.)

So, there’s no savings to the seller and thus no savings to pass along to the unrepresented buyer.

Buyer’s agents can (and do) provide a lot of value to the buyer. He/she can run comps to determine the real value of the house. He/she can negotiate on behalf of the buyer and is likely a better real estate negotiator than the buyer.

A buyer’s agent has a fiduciary duty to the buyer; a listing agent does not. Approaching a listing agent without representation deprives a buyer of all these tools and protections.”

Don Tepper, managing partner, Solutions 3D LLC

 

This one really makes no sense. If you were to go to court, would you choose to defend yourself? If you had a lawyer represent you, and it was free, why would you try to go it alone?

Buying a home is probably the biggest financial transaction you will do in your lifetime. You need to have someone that represents you, and not the seller. In South Carolina, the services of a Realtor are free to buyers!

 

Worst Real Estate Advice: Buy As Much House As You Can Afford

The worst advice is also the most common, which makes it, in aggregate, the most impactful.

Many people tell home buyers to make their purchase based on how much house they can afford.

Why this is bad advice:

“The underlying assumption is we should allocate our spending on housing up to some limit determined by someone else based on what they thought was appropriate.

Instead, I think people should ask, “What house works for your lifestyle and situation?”

I didn’t follow that advice. Instead, I bought a house that cost half of what I could afford.

As a result, I’m on track to pay off my mortgage in under seven years and hit my retirement net worth target in my 30s.

Advice I would give to buyers: If you buy too soon, you’re trying to shoehorn life’s uncertainty into a confined house cost and size.

My advice is to solve for the following first: C+M+K=House

• C=Career. Do you see yourself in this job or field long term? Is the pay predictable? Do you have to move cities to be promoted at your firm?
• M=Marriage. That bachelor pad might not work for a couple. Or your future spouse might have a lot of school or credit card debt that needs to be paid off first.
• K=Kids. You might have triplets and need more rooms. Or you might not have kids at all but have three rooms you don’t need.

Each of these factors can instantly change your life equation.

If you purchase before knowing at least a couple of the variables, then it’s like ordering pizzas for a party before you know how many people are showing up.

If you wouldn’t do that for a party, why do it for the most expensive thing you’re probably ever going to buy?”

Jay Tea, financial blogger

Keep in mind this is part of the reason we had the market crash and mortgage meltdown back in 2007-2008: people were overextending themselves trying to buy as much home as they could afford.

In many cases, they purchased more home than they could afford. (And no, we are not headed towards another crash!)

By the way, I really like the pizza analogy!

Worst Real Estate Advice: Waive The Home Inspection To Save Money

Why this is bad advice:

“Regardless of how perfect you think the house is, you should never be tempted to waive the home inspection.

Without a licensed inspector viewing the property, the buyer will only be allowed to comment on issues that can be seen with the naked eye, whereas the costliest repairs often concern the foundation and groundwork of the property.

By forgoing this step, the buyer essentially loses their right to make any requests for additional repairs that aren’t agreed to at the time of signing the initial purchase contract.

This often results in having to pay out of pocket if other issues are found in the future — leaving you in an unexpected financial bind.

The bottom line is to never cut corners, especially when it is regarding such a large, lifelong investment. The risk is just not worth the potential reward.”

Sacha Ferrandi, founding Partner, Source Capital Funding, Inc.

Worst Real Estate Advice: Base Your Offer On An Algorithm

Some buyers are told by others (such as friends and co-workers) to base their offer on either some computer algorithm — such as a Zestimate from Zillow — or by simply taking the listing price and reducing it by x%. Or they simply use the tax assessment.

Why this is bad advice:

“Zillow and other price estimators are notoriously inaccurate. Zillow itself publishes how close its estimates come to actual prices, and most cities/geographic areas are uncomfortably high or low.

Some of the algorithms mix housing types, such as condos, townhouses, and single-family homes. Most mix style of house. They seldom take into consideration the condition of the property.

Taking the listing price and reducing it by x% is equally unwise. Different sellers and agents have different strategies for pricing homes.

If a house is overpriced by, say, 7%, and the buyer simply applies a 5% reduction, he/she is still overpaying.

On the other hand, some agents are quite accurate in pricing properties, while others will deliberately underprice a property in hopes of triggering a bidding war.

In these cases, taking 5% off the price of an already attractively priced property often results in the buyer losing out on the house.”

Don Tepper, managing partner, Solutions 3D LLC

 

Awhile back I covered in greater detail the inaccuracies of the Zillow Zestimate.

Real Estate Advice: Buying A Home Doesn’t Have to Be Scary!

There were also some interesting takeaways from NerdWallet survey:

• 41% of Americans who have applied for a mortgage felt they were not aware of all of their loan options during the lending process.
• Among mortgage applicants, 28% said they felt they weren’t a priority to their mortgage professional during the loan process.
• 6% of mortgage applicants reported that they had been denied a mortgage. Of those who have been denied, more than half (52%) said they had a high debt-to-income ratio, 39% said they had issues with credit history or score, and 25% said they had insufficient income
• Many American homeowners said the home-buying process was: stressful (42%), complicated (32%) and intimidating (21%), yet 41% said it was manageable and 30% even said it was rewarding.

If you are thinking about a buying a home, and especially if it will be your first home, then the whole process of applying for a mortgage and negotiating the sale of a home can be overwhelming and intimidating.

Seeing these results can certainly increase your anxiety.

It is important to learn as much as you can about the mortgage and home buying process prior to jumping in because and educated buyer is a smart buyer.

But not all Real Estate Agents and Mortgage Officers are the same. It is important that you choose to work with the right ones.

To learn more about applying for a mortgage and the process of buying a home, download a free copy of my “Demystifying The Mortgage Process Guide”.

You can also check out my other free real estate guides that you can download as well.

Tomorrow I will take a deeper look at the NerdWallet survey, and will link that here.

If you want to keep up with the latest real estate stats and trends, follow me on this blog or this blog.

Also, be sure to check out my Pam Marshall Realtor website.