Although millennials are poised to be the largest group of homebuyers this year according to realtor.com, the generation also appears to be woefully under-informed about the real estate industry, a new survey by Homie claims.
The flat-fee brokerage and real estate tech company surveyed approximately 1,000 millennial Americans on questions related to real estate and found that many respondents had misconceptions about how the industry works.
For instance, 65 percent of survey respondents did not know that the usual commission paid to an agent when selling a home is 6 percent of the home’s price. Homie noted that this lack of understanding may be one reason why many millennials are trading traditional agents and brokerages for iBuyers because there’s a perceived convenience when using an iBuyer, and millennials are not aware that iBuyers may be charging them up to 14 percent of the cost of the home.
Forty-two percent of respondents were also under the impression that using a buyer’s agent is free of charge, whereas the homebuyer typically funds both the listing and buyer agents in a transaction.
In addition, 16.5 percent of survey respondents incorrectly believe that using a real estate agent to buy or sell a home is required by law. And a vast majority of millennials polled — 82 percent — are unaware that a real estate license can be acquired in as little as 1.5 weeks of training.
When it comes to getting a mortgage, more than half of respondents did not know how much money was needed for a down payment in order to avoid getting Private Mortgage Insurance (PMI). Usually, PMI is required when the buyer cannot make a 20 percent down payment.
Not only did Homie’s survey show that millennials have misconceptions about the homebuying and selling processes, but it also showed that millennials feel uncertain about how to buy and sell a home. Eighty-seven percent of survey respondents said they felt unclear about how to buy and sell a home.
“The real estate landscape has left consumers confused for decades, and while confidence in traditional agents is relatively low, real estate literacy may be even worse,” Johnny Hanna, CEO and co-founder of Homie, said in a statement. “These findings make Homie even more determined to arm Americans with basic real estate education and tolls to help them make the smartest decisions when buying and selling a home.”
In response to the survey results, Homie is providing several free educational resources to first-time homebuyers and sellers on its website.