Closing costs can be a real ‘Black Box’ if you are not sure of what to expect!
Side-Bar: If you are a seller be careful of Wholesale buyers or iBuyers. Often they will charge a sales fee (equal to a commission), contingency fee (which always seems to max. out), repair costs; and over-the-top inspection lists (which get charged to you but never get fixed).
You’re excited because you just found the perfect home. The neighborhood is great, the house is a great fit for your family and the price is right.
But the asking price is only the beginning. Be prepared for additional — and often unexpected — home buying costs that can catch you off guard and quickly leave you underwater on your new home.
Expect the unexpected
For almost every person who buys a home, the spending doesn’t stop with the down payment. Homeowners insurance and closing costs, like appraisal and lender fees, are typically easy to plan for because they’re lumped into the home-buying process, but most costs beyond those vary.
The previous owners of your home are the biggest factor affecting your move-in costs. If they take the refrigerator when they move out, you’ll have to buy one to replace it. The same goes for any large appliance.
And while these may seem like a small purchase compared to buying a home, appliances quickly add up — especially if you just spent most of your money on a down payment.
You’ll also be on the hook for any immediate improvements the home needs, unless you negotiate them as part of your home purchase agreement. I always consult to make sure at least some of these expenses can be padded by the seller during the BINSR phase of the process.
Unfortunately, these costs are the least hidden of those you may encounter.
When purchasing a home, you’ll always hire a home inspector (about $350 min depending on the size of the home) to ensure the home isn’t going to collapse the next time it rains. Inspectors look for bad electrical wiring, weak foundations, wood rot and other hidden problems you may not find on your own, or that immediately catch your eye.
Worse still, these problems are rarely covered by home insurance. If an inspector discovers a serious problem, you’ll then have to decide if you still want to purchase the home. Either way, you’ll be out the cost of hiring the inspector.
Consider the creature comforts
Another cost is your own comfort. There are a number of smaller considerations you may not think about until after you move in.
Are you used to having cable TV and WiFI in your home? If so, is your new home wired for cable? Most of the homes here in the Valley of the Sun have this available which is such a great thing! It’s much harder to watch a technician crawling around punching holes in your walls when you own those walls.
And if you’re moving from the world of renting to the world of home ownership, you’ll probably be faced with much higher utility bills. Further, you could find yourself paying for utilities once covered by a landlord, like water and garbage pickup.
Plan ahead
The best way to prepare for the unknown and unexpected is through research and planning. This starts with budgeting before house hunting and throughout your search.
Look at homes in your budget that need improvements, and then research how much those improvements could cost. Nothing is worse than buying a home thinking you can fix major items or landscaping issues (especially) for a few hundred dollars and then realizing it will cost thousands.
There’s really no limit to how prepared you can be. Say you find a great home that’s priced lower than others in the area because of its age. You may save money on the list price, but with an older house, you could be slapped with a much higher home insurance payment, making the house more expensive in the long run. I will help guide you through things like this and keep you protected!
This is where proactive preparation comes in. Research home insurance and property prices in the areas you’re considering to make more educated decisions before you ever make that first offer. Again, I can guide you way easily during the discovery stages of a home search.
Clearly define how much you intend to put toward your down payment, and then look at how much cash that leaves for improvements and minor costs, like changing the locks. That way, when you find a house at the high end of your range, you’ll know to walk away if it requires a new washer and dryer or HVAC system upgrade.
Establish a rough estimate for as many costs as you can think of, and be extremely critical of homes at the top of your budget — otherwise, you could easily end up being house-poor. You want to enjoy your life in your new home and not be riddled with stress surrounding its purchase.
Know your budget and plan ahead. Buying a home is a lot less scary when you know what you’re getting into.
I’m here to help you discover these costs and prepare you for the realities of home ownership. If you are a move up buyer the same still applies. If you are a move up seller…. this works very well in reverse! Try to discover where your house is at now with a check-up form a home Inspector – ahead of putting it on the market. Yes, if anything is discovered you will have to disclose it but, it will be discovered anyhow. Better to put your best foot forward and fix all the little things that might be an issue up front, buyers will appreciate your efforts and care for the home right away, it almost always increases offer prices too! Call me with any questions as I’m here to help! Christy Crouse
