If you’ve ever watched the Hunger Games Trilogy, read the books, or both, then you know that the two main characters, Katniss and Peeta, were put through the ringer trying to survive the Games. At the end, Peeta is mentally exhausted and has difficulty remembering or deciphering what is real and not. Whenever things get confusing, he simply asks Katniss, “Real, or not real.” It would be amazing if everything in life could be reduced down to these four simple words. In a world full of gray, a little black and white would be nice. While we all know that isn’t the case, we wanted to bring some clarity to real estate and debunk common myths you might have heard.
Myth: Zillow is accurate or a good tool to use.
Not real. While Zillow is a great way to search for homes and is user-friendly for searching in certain areas, it is not always accurate. Zillow cannot replace an agent who knows the area. It also can’t walk through homes or physically view properties, and as we all know about the internet, what you see is not always what you get. Zillow is a great starting point but is by no means a reliable source.
Myth: If you pay more for a home, your agent makes more money.
Not real, technically. The difference an agent makes on a $100,000 property and a $115,000 is less than $100. So if your agent recommends you go slightly higher on your offer to purchase a property, it is not for their benefit, it’s for you. The only time an agent will make more money is if the buyer has a higher price point. For example, an agent will make a higher commission on a $500,000 home than a $200,000 home. Generally speaking though, a few thousand dollars here or there on a purchase price will not affect what an agent takes home.
Myth: An agent keeps the entire commission.
Not real. An agent typically makes 3% commission per transaction. Contrary to popular belief, they do not pocket that 3%. Each agent must hang their license in a office with a broker in order to be in compliance with Tennessee real estate laws. The agent then pays a percentage of each commission to the broker or firm. This is part of an agreement between the broker and the agent. The broker offers a commission split with the agent, which the agent must accept before hanging their license at the firm. Commission splits may vary from firm to firm. A common split is for the broker to take 30% of the 3% commission, leaving 70% for the agent. It can get complicated, but just know that an agent only nets a portion of the commission from each transaction.
Myths: Kickbacks are common between agents, title companies, inspectors, and vendors.
Not real. There is a law in place, circa 1974, called the Real Estate Settlements Procedure Act (RESPA) that prohibits agents from receiving gifts or kickbacks. Violating this law can result in penalties and potentially losing your license.
We will continue debunking real estate myths in our next blog post, so stay tuned!