Overall, today’s home buyers tend to be fairly knowledgeable about the real estate market, but there are still a few points of confusion in the process, a new survey by Zillow of 1,000 potential home buyers finds.
Here are the five main areas of confusion the survey revealed:
· Appreciation: About 42 percent of home buyers believe home values will appreciate by 7 percent a year. Reality: Historically, home values in a normal market appreciate by 2 to 5 percent in a year.
· Mortgage Insurance: 41 percent of buyers think that they will have to purchase private mortgage insurance, regardless of the amount of their downpayment. Reality: Buyers only need to purchase PMI if their downpayment is less than 20 percent of the home’s purchase price.
· Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine if a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value.
· Home owner’s insurance: 37 percent of home buyers said that buying home owner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance.
· Ownership: 47 percent of home buyers said a prospective buyer owns a home after the purchase contract is signed. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership.