The housing market is daunting to many homebuyers. Trying to understand the ins and outs of home-buying and home-owning seems impossible for many, leading to a lot of misconceptions from buyers.
A new report from Clever found that buyers are confused on a lot of aspects of the housing market and home-buying, with 83% of homeowners saying they were surprised by parts of the home-buying process. When entering the market, 63% of home buyers had to adjust their priorities, and 65% had to adjust their budget.
In addition, non-homeowners are overly anxious about the process of buying a home.
About 45% of buyers said they are worried about buying the wrong home, when only 20% of current homeowners report feeling buyer’s remorse. Also, about 78% of non-homeowners also think buying a home will be stressful, but only 47% of homeowners say it actually is.
Key highlights:
- The average age of a first-time home buyer is 36, but 73% of Americans think it’s much younger.
- 73% of Americans don’t think homes are affordable right now, yet 60% underestimate the median home price. Just 14% know the median price ranges between $400,000 and $499,999.
- Many homeowners misjudged how much it would cost to purchase a home, and 1 in 3 (34%) paid more for their home than they initially planned.
- In addition to their mortgage, homeowners spend about $13,150 annually on home-related expenses—such as utilities, maintenance, and improvements—but 48% of Americans believe annual homeownership expenses are less than that amount.
- Mortgage lenders recommend putting down 20% on a home, but 62% of Americans believe it is a requirement. More than 1 in 5 Americans (21%) say home buyers actually need to put down more than 20%.
- 23% of non-homeowners think saving for a down payment will be the most challenging part of buying a home, but only 8% of homeowners say it actually is.
- Real estate agents generally communicate with the seller, but 2 in 3 non-homeowners (65%) mistakenly believe it’s the buyer’s responsibility.
- The seller usually pays agent commission, but 62% of Americans think buyers pay their agent’s commission. This misunderstanding could be why 65% of Americans wrongly think buyers can save money by not working with a real estate agent.
- More than half of Americans (51%) underestimate how much they’ll pay in Realtor commission. Only 11% of Americans know that agents earn 6% of the final sale price.
- Just 12% of Americans know the current rate for a 30-year mortgage hovers between 6% and 7%. 43% of Americans think the interest rate is higher than 7%, with 1 in 4 saying it’s more than 10%. The last time rates reached 10% was more than 30 years ago in 1990.
- 43% of non-homeowners think they are knowledgeable about the mortgage process, but nearly two-thirds (64%) wrongly assume buyers should find the home they want to purchase before getting pre-approved.
- About one-third of Americans (32%) say a credit score of at least 700 is necessary to purchase a home, but in reality, buyers can qualify for a conventional loan with a score of 620.
Major takeaway:
Client education is a must for agents in order to be successful.
Buyers, especially first-timers, don’t have the experience that you as an agent have with the market. They will have a lot of questions and misconceptions that it’s your job to break down and explain to them.
By taking the time to educate clients, they not only understand the buying process and have more confidence, but they also trust in you and your expertise much more. This is key to successful purchase for a client, and to earn a great recommendation, referrals and a long lasting client relationship.
For the full report, click here.
