Whether you're buying a house, a condo or a co-op, there are plenty of hidden costs that are easy for to overlook. Ingrid Hess, a real estate agent for more than 20 years, has seen these home buying costs turn into pitfalls for new homeowners. She advises first-time buyers to hook up with a seasoned professional who can act as their guide through the process. "When you buy, you have to ask the right questions," says Hess, with William Pitt Sotheby's International .
Hess has prepared a list for new homebuyers of potential hidden costs in home buying that can bust a buyer's budget. Understand them, and you'll be able to enjoy your new home free of unanticipated financial burdens.
- Closing costs. Each bank has different fees, so ask your attorney or mortgage broker about obtaining a form that discloses all the items included in the closing costs for buying a home. "Banks and mortgage companies call things by different names, so make sure you know what each item is about," says Hess. "For example, one bank might call something an 'application fee' while another calls it a 'doc fee.' You have to know what it is so you can know what the costs include."
- Attorney's fees. Attorneys often charge a fixed fee for real-estate closings, but sometimes the fee is negotiable. Find out up front so that you can compare attorneys' costs. "They shouldn't charge by the hour, because it is relatively simple work," Hess advises.
- Appraisals. In most markets, an appraisal usually runs $300 to $400. While the costs are straightforward, it's important for you to do your homework and find a well-regarded appraiser. Remember, their opinion determines property value.
- Inspections. It's essential to have the house thoroughly inspected by a professional. "You could end up spending thousands if the inspection isn't correctly done," says Hess. An inspection typically costs $300 to $500. When it's completed, you and the present homeowners can negotiate which repairs they'll pick up the tab for, and which ones you'll have to cover.
- Condo association charges/HOA fees/maintenance. If you live in a condo, you'll be responsible for paying homeowner association dues and sometimes an additional maintenance charge. Budget for these fees before you purchase. They usually have to be paid every month, and they're not negotiable.
Utility charges. If you're an apartment dweller, you may not be accustomed to paying for utility charges like gas, water, and trash collection. As a homeowner, you're on the line for these bills, which can add up to hundreds of dollars or more every month. A little research into your new municipality, as well as asking the previous homeowners about their bills, will help prepare you for the extra expenditures.
Mike is still looking to buy, but he has adjusted his budget--and his thinking--to take these hidden costs of home buying into account -- "I'm glad I know what to expect. I will be able to enjoy my new place and not worry about how I'm going to pay for everything."
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