Home Buying & Selling How Lack of Knowledge Hurts New Investors

How Lack of Knowledge Hurts New Investors

by admin
0 comment

We live in an era where everyone wants everything quickly and easily. However, convenience can be costly, especially for real estate.

Not only are people busier than ever, they’re looking for ways to dive into real estate and make transactions faster, but they don’t have all the knowledge they need. A survey of 1,000 millennial Americans On real estate related topics, it reveals that there are some facts about the industry that many do not understand.

People often think of real estate as a very complex process and don’t spend time learning basic information. The result is confusion about unnecessary fees and the cost of owning a home.

“The results of the survey highlight the extent to which the real estate industry has historically complicated the process, added unnecessary fees and caused confusion about the cost of owning a home,” said Homie, a real estate technology company that conducted the survey. States. “The millennials surveyed are barely aware of much of the complexity associated with buying and selling real estate, emphasizing the need for greater transparency and education.”

New buyers do not understand the real estate process and are unaware of the excess amount they are leaving on the table. As an educator and coach for real estate investors, nothing upsets me anymore. We are all working hard to throw away our money.

You are busy, and I understand it. So let some light shed on some simple facts and adjustments you can make.

Learn the basics

Yes, there are details to learn and important questions to ask. Not everything can be predicted at all times, but you should always be aware of what is logically meaningful to your process.

It doesn’t take long to find a way to transparency and education about the basics of how real estate works. With Bigger Pockets and a wealth of informative free blogs, the information you are looking for is just a click away.

Related: The ultimate beginner’s guide to real estate investment

Commission confusion

Notable 65% of the millennials surveyed did not know how much a real estate agent would charge to sell a home. The rate is typically 6% of the home price and is evenly divided between the buyer and seller agents. The seller pays all fees.

6% of commissions are standard, but fees may be negotiated or created. For example, if the owner sells the house, they can save on those charges. You can also use Redfin or an agency to pay a fee to list your home on MLS just to save on fees.

Agent advice

You may not need to use a real estate agent at all! However, if you don’t want to handle some processes or need help, it’s well worth the price. The right agents will help you market, negotiate, and take all the steps in selling your home.

It is important to read the contract details and ask questions. Companies like iBuyers Charge 6-14%! They make the process very easy, but with a $ 300,000 home sale, you can pay $ 42,000 for the service at 14%.

Almost half of the people surveyed thought it was free to buy a home on behalf of the buyer. “This myth has helped keep real estate fees artificially high, as the current system makes it difficult for sellers to negotiate buyer agent fees (BACs). In fact, buyers’ money is usually. Was used to pay both listed and buyer agents in transactions, “Homie pointed out.

Related: How to Find an Investor Friendly Real Estate Agent

Whenever you sell real estate with an agent, you are responsible (as a seller) to pay the fees of both the buyer and the seller. If you sell a home for $ 250,000, that 6%, or $ 15,000, goes to pay the agent. Buyers can often save on purchases because sellers do not have to pay agency fees in the case of sales by the owner or the absence of an agency.

While there are many benefits to using a good realtor, 16.5% of the millennials surveyed mistakenly believe that consumers are legally required to use a realtor to buy or sell a home. I’m thinking.

Real estate transactions can be complicated, but if you hire a lawyer or use an escrow company (depending on state regulations regarding real estate transactions), use the appropriate documentation and documentation to process the transaction and the law. You can secure specific guidelines to protect your transactions.

In addition, just over 80% of the millennials surveyed were unaware that they could get a real estate license in just a few weeks in most states. Remember that real estate is not a brain surgery. It takes much less time to learn and is cheaper than becoming a medical surgeon.

Real estate agent handing over the house key

Mortgage myth

Only 13% of the people surveyed were confident in buying and selling homes. Understanding your mortgage is essential and there are some myths I’m trying to dispel here.

If there is no 20% down payment, the bank will charge a so-called down payment Private Mortgage Insurance (PMI).. Yes, paying an extra fee is never great, but if it takes you to the property, it’s worth it.

There are many ways to qualify and get a loan. You may be eligible for FHA (3.5% down only) or VA loan (0% down). Or maybe you can be a partner in a transaction and the partner can bring a down payment so you can avoid PMI. Be sure to consider all options.

Loan interest rate

Lenders’ loan rates are not always the same. I recently refinanced my house and went shopping, saving more than a quarter of my loan. The loan officer I worked with in several other deals was very knowledgeable and kind, but after all, I liked the guy, so I justified an additional $ 23,000 in spending. I could not do it. (Yes, that’s the amount I saved over the entire term of the loan.)

Mortgage payoff

The traditional idea of ​​owning a home is that you should pay it off as soon as possible in order to be debt-free. Interest rates are constantly changing, so you can use your extra cash to buy more real estate or Claim interest on your mortgage as a tax deduction.. Both are good choices, depending on what you want to achieve.

If you like the idea of ​​not paying your mortgage, paying off your mortgage is a surefire idea. If you want to earn more income, having more fortune and maintaining a mortgage is better suited to your goal.

If you decide to keep your mortgage and focus on investing in other real estate, you need to avoid taking too much debt to risk being insolvent. Make sure you have a budget for repairs and vacancies.

Related: Financially Good: Will You Pay Off Your Mortgage or Invest That Money?

Real estate investments can be unpredictable and require reserves to cover unexpected costs. At COVID-19, I had some traits that didn’t bring the expected return, some of which I had to cover from my pocket. I needed to be able to save that money in order to make a payment.

With a 30-year fixed interest rate, most of the loan’s first 10-year payments go to interest.If you don’t want to have your loan for 30 years, you can explore Various options for faster repayment.. YouTube has one aggressive strategy to discuss getting HELOC and using it as a checking account. Full repayment of loan within 5-7 years.. However, a 3.5% loan may not be worth paying back sooner if there is a way to make a 10% return.


There are many ways to save real estate and make more money with just a little time to educate yourself on different real estate topics. Many of the agencies “made for you” offer quality service, but they always have price tags that aren’t always easy to see. You can save a lot of money by shopping at the best rates, calculating options and getting information about how the whole process works.

Convenience comes at a price. Once you know the price tag, you can decide for yourself if it’s worth it.

Sign up 3

What do you want to know when you start real estate?

Share some lessons in the comments below.

You may also like