Buying a Home? Buzz Words to Look Out For

This story originally aired on October 7, 2005

Owning your home is often described as the "American Dream," but whether you want to buy a home or sell one, it's scary. With so much money involved, it's hard to know if you're getting the best offer for your home, or paying too much when you buy one.

There are a lot of tricks of the trade that can cost you time and money, starting with the language in ads. Real estate listings -- with words like cozy, charming and fantastic -- make everything sound great.

Phil Loriana -- who is not a real estate agent but used to work for them -- was candid with "20/20" about the apartments he shows and the descriptions used in listings. "You really have to have very little conscience, because you know that you need the sale," he said.

Reading Between the Lines

Loriana said certain words, like charming, don't mean what you think they do. "It means it's old, it's dark, it's dank and it's small," he said.

The ABC consultants who wrote the best-seller "Freakonomics" say Loriana is on to something. In their book, they explain that conventional wisdom is often wrong.

"Fantastic, charming, spacious, those are terms that are correlated with lower sales prices," said co-author Stephen Dubner.

Dubner's co-author, economist Steven Levitt, compared Chicago real estate listings to home sales, and found that you should expect problems when you see exclamation points and certain words like "charming," "spacious," "great neighborhood" and "fantastic" in real estate ads.

"The dead giveaway for a house that's in trouble is the exclamation point. When you've got exclamation points littered through the listing, that's probably a sign the house has problems," he said.

Many real estate agents told "20/20" Levitt is right that the meanings of certain words are stretched in real estate ads.

"Cozy most likely does mean small," said David Oppenheim of Halstead Properties.

"'Fantastic' is a lazy broker term. If you can't think of anything else, you tend to throw it in," Felicia De Shabris, a broker for Halstead.

By contrast, Levitt found that five descriptors were associated with higher prices: "state of the art," "gourmet," "maple," "granite" and "Corian" (that's a material for countertops).

Is a Broker Worth It?

We watched a real estate agent who was careful to mention some of these things when she was showing a property.

That's one reason to hire an agent, even though you'll have to pay three percent to six percent commission -- they know more. And in a softer real estate market, that can be reassuring.

Michael and Danielle D'anna hired broker Kelly Collins to sell their house in September 2005, and they agreed to pay her a full six percent commission.

"You get what you pay for. And we look at it more as an investment with somebody that we trust and want to do business with. And for us, we sleep easier at night knowing that we have somebody really looking after every aspect of the sale of our home," Michael D'anna said.

Collins did sell their house for more than the asking price of $600,000. But six percent of that comes to $36,000. Is it worth paying that large commission for one sale?

Collins said she's worth it.

She may be. Brokers work hard to make the sale. They will negotiate for you. They'll help you write the ad for your house, and refer you to an engineer who can inspect your home.

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