What are some common real estate misconceptions and how to address them?

Anyone involved in the real estate industry for some time could likely rattle off a handful of common misconceptions that consumers have about real estate, so I thought it might be helpful to provide some practical guidance on addressing these misconceptions when they arise.

Looking for our Forever Home

Hope springs eternal, and nearly every home buyer genuinely believes the home they are buying is their “forever home.” The idea is that this is the last home they will ever buy, so it needs to be perfect in every way. The truth is that by the numbers, the most significant cross-section of homeowners in Canada move in line with life changes, resulting in a buyer becoming a seller usually in less than ten years on average. In my experience, this is generally around six years for the young to middle-agers and 10ish for the more mature crowd. The reason is simple: no house is perfect for all the changes your life will go through with finances, relationships, babies, teens, etc. The home the buyer should be looking for should be as perfect as they can get to match their current situation with an eye to moving into their next perfect home in 6-10 years. Life is constantly changing, and buyers should consider that their home needs will change along with it, so they need not get too bound up in finding the forever home but rather the right one for right now.

Home size is directly correlated with home price.

There has been this idea that you can quantify a home by its square feet as if you are pouring sugar into a measuring cup to see if you have enough to make a cake. This misconception was elevated with the introduction of the Residential Measurement Standard (RMS) in Alberta several years back. Can I say kindly that while a buyer is calculating squares vs price, they have missed the beauty of the forest because they cannot see past the trees? A home consists of more than just its measured size, and buyers know this intuitively when they ask for specific features in their search. They say:

“I want a three-bedroom bungalow in a cul-de-sac with an open concept, finished basement, granite counters. It must be fenced and landscaped and include a large deck, attached garage and storage shed in the yard. Oh, and we don’t want to look outside of the Happy Hollow neighbourhood.”

Then, when they find it, they look at the price on the MLS® sheet, divide it by the size and say, “Oh, this one is a little on the pricey side!”. The simple calculation of price per square foot ignores all of the features they listed as important to them and makes it irrational to compare to the cost per square foot of other properties that don’t have those features. The house is valued by its total package offering, not its size, plain and simple.

Always renovate to sell

This one always makes me chuckle because the vast machinery of the home renovation television show producers and networks entirely props it up. You have watched them take a modest house, bring in some celebrity personalities to put on a hard hat and break a few walls in a tank top, replace old stuff with new stuff, and finally stage the property for sale. Then, at the end of the show, they overlay a list showing the original market value of the home, the cost to renovate, and the new list price of the house and shocker of shockers, the property renovation was totally worth it! This is barely reality TV and not at all reality. Appraisers have crunched the numbers and confirmed empirically that nearly all of the renovations you do for the sake of a sale would lose you money when comparing the cost to do the renovation and the amount of recapture over a comparable home in the same neighbourhood without the renovation. To be fair, three exceptions from my experience will usually earn you more than you pay for the work:

1. Professional painting of the home makes it smell and look fresh and clean
2. Correcting functional obsolescence, which is, for example, a 6-bedroom home in a modern family neighbourhood that has only one bathroom… it is worth it to build a second bathroom if possible, or you will have a hard time appealing to the buyer searching in that family neighbourhood.
3. Neglected maintenance issues such as tattered carpet, dripping hot water tank, etc., anything that would make the buyer think that the property is not well cared for. Old stuff is ok as long as it is well-maintained.

Every other renovation a homeowner does should be for their enjoyment while they own the home, not just before they sell it, since they will not get back what they put in, despite what they saw on TV.

You need to choose the best time to sell

“Spring is the best time to sell” is something well-meaning people say around the water cooler, and it continues to seem like good advice because the market usually ticks up in the spring. Birds sing, flowers bloom, and buyers and sellers start itching for a change. This is a misconception of the fundamental nature of supply and demand; let me explain. When demand (number of buyers) goes up, and the supply (number of listings in an area) stays the same, prices will rise. The opposite is also true; prices go down when demand goes down, and supply remains the same. Imagine a set of old-timey balance scales, with supply and demand on opposite sides; the market always seeks balance. What a seller really wants is for the price to rise at the exact time they put their property on the market, so by thinking that there is an uptick in buyers in the spring, their price will be higher then. The reality is that they are not the only ones thinking that way, and usually, spring and fall markets have buyer and seller rates increase at relatively the same rate, holding prices steady. You end up with more competition on the buyer and seller side of the equation. If a seller lists in the winter or summer, there will likely be fewer buyers and fewer listings to compete with, so it usually balances out. The reality is that the best to sell is always now.

For some reason, real estate misconceptions seem especially pervasive in casual conversation, and because of this, one should always discuss market conditions, or real estate ideas with a local REALTOR®. They can provide a check on age-old assumptions or sage advice from Uncle Larry by providing real-time data and advice.