Zillow polls potential home buyers
Real estate media site Zillow.com surveyed prospective home buyers by asking basic questions about the buying process to test their knowledge and there were some surprising results. Consumers are well educated on the real estate process, but nearly half had unrealistic expectations for home value appreciation, 42 percent indicating they believe homes increase in value seven percent every year while the average appreciation is only two to five percent annually. Although knowledgeable on the buying process, not all portions of the transaction is clear to consumers with only 44 percent able to differentiate between an appraisal and an inspection.
Overall, prospective home buyer respondents got more than half of all questions correct, but two in five believed they are required to buy private mortgage insurance (PMI) regardless of the amount of their down payment and more than one in three respondents incorrectly believe that buying homeowner’s insurance is optional.
Consumers know that they can negotiate
Additionally, almost half of all respondents did not understand at what point they will actually own the home they are intending to purchase, believing that after a purchase contract is signed, they own the home. The good (and not surprising news) is that 87 percent of respondents know that closing costs are negotiable and vary by the bank and the lender.
“It’s troubling that we’re still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation,” said Dr. Stan Humphries, chief economist at Zillow. “It’s great that buyers seem to have a fairly solid grasp of the home-buying process, but since this is one of the biggest financial decisions of most people’s lives, it’s even more important that they understand how that investment will appreciate after they sign the papers. Over-estimation of the appreciation potential will lead many to buy real estate when the time in which they plan to live in the house may make renting a better strategy.”
It is important to note that Zillow does not claim this to be a scientific poll – it is limited to Zillow site visitors that were willing to take a buyer poll, but it is a good pulse on the market that reveals consumers are generally educated but often misinformed.