15 Hidden Real Estate Costs That Agents Won’t Warn You About
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The first thing that comes to peoples mind when they think of purchasing a home are the down payment and monthly mortgage payments. But a series of lesser known costs lurk behind those more obvious ones that can surprise buyers. No matter if you’re a first time home buyer or an experienced home owner, these hidden costs are often overlooked and can stretch your budget beyond what you’d think.
As much as real estate agents might want to be upfront, they often don’t highlight these costs — which are the types of things that could stop many buyers in their tracks — and sometimes prefer not to rock the boat. Here are some of the most common hidden costs every buyer should know about before jumping into a real estate purchase.
Property Inspections
Issues revealed by inspections may warrant additional specialized inspections of things such as mold, radon or termites. These are added costs for each of these inspections and while highly recommended, they’re not cheap. The average home inspection can run from $300 to $500, but it all adds up when you have to do more than one.
Closing Costs
If you don’t know what you are getting into, closing costs are often discussed in passing and can be shockingly high. Those closing costs can run up to 3-6 percent of the home’s purchase price — so on a $300,000 home, you’re potentially looking at another $9,000 to $18,000 on top of your down payment.
HOA Fees
If you’re purchasing a condo or a home in a planned community, homeowners association (HOA) fees can be a long term, sometimes unexpected, financial commitment. The fees which cover maintenance of shared spaces and amenities can vary widely. HOA fees are easy to forget when you’re already crunching numbers on a mortgage, but they can tack on hundreds of dollars a month.
Property Taxes
Buyers aren’t necessarily unaware of property taxes, and they don’t always estimate how much they will be. This may not be stressed by real estate agents because taxes can be so very different from one area to another. Leaving a low tax area for a high tax area could cost you a lot more than you thought.
Utility Upgrades
Many buyers don’t factor the cost of upgrading utilities when moving into a new home. Especially with older homes, the wiring, plumbing, or insulation may be outdated and will likely increase your utility bills. In the long run, investing in energy efficient upgrades, like new windows or insulation, can help; however, you will see a number on your power bill come along with these fixes.
Services Include Landscaping and Yard Maintenance
It’s great to have a big backyard until you think about the time and money it takes to keep it nice. Yard upkeep doesn’t just take time, it can be expensive, whether its mowing, landscaping, or tree trimming. Regular upkeep or a one time makeover for curb appeal cost varies depending on the size of the yard and the level of maintenance, depending on whichever is hired by the landscaping company.’
Home Insurance
Home insurance is something your mortgage lender will require and while it’s great protection, it’s also a regular cost that can catch buyers off guard. Each home’s location, size and insurance needs will, among other factors, determine its insurance rates. For example, if you purchase a home in a region prone to natural disasters, besides the basic home coverage, you may also need flood or earthquake coverage, and premiums on these policies can be eye poppers above and beyond what you’re already paying.
Furnishing and Decorating
It’s exciting to come home until you have to fill it. Furniture, appliances and decor aren’t cheap, and the basics pile up fast. First time buyers tend to focus so much on the purchase, they forget to budget for furniture.
Mortgage Insurance
Assuming you’re putting down less than 20%, you’ll probably need to pay for private mortgage insurance (PMI), which isn’t usually discussed in the early stages. PMI can cost you hundreds per month and you’ll be paying it until you accumulate enough equity in your home. In addition, many buyers don’t realize that they’re paying more for this expense when their lower monthly payment is based on the loan amount only.
Replacement of Appliances
If the appliances there are new, don’t assume they will last forever. Everything from washers, to HVAC systems has a lifespan, and when they need to be repaired or replaced, the cost can really add up. Saving money in advance to set aside for emergencies when appliances do need attention will help you avoid panicking for money down the line.
Pest Control
In areas that tend to be infested, people tend to forget about the hidden cost of pest control. Ongoing pest control adds up, including a termite inspection at closing, and if you need ongoing treatments for rodents, ants, or other common household pests. Getting regular service costs anything between $300 and $500 annually, depending on the size of your property and the degree of service you need.
Unexpected Repairs
A thorough inspection doesn’t guarantee against problems cropping up once you move in. Unexpected repairs from plumbing leaks, to foundation cracks, are almost inevitable. Experts recommend putting away 1-3% of the purchase price of your home annually for maintenance and to cover the typical repairs.
Moving Costs
The cost of hiring a moving company or renting a truck would seem to be minimal, but it just adds up. The moving costs depends on the distance, as well as the amount of belongings you have.
Permits for Renovations
When remodeling your new home, expect to pay for permits. Most homeowners don’t know that even small renovations such as adding a deck or updating electrical systems need permits, which cost money. Permit costs run anywhere from $50 to hundreds of dollars depending on the work, and vary by region.
Realtor Commissions
Though sellers typically pay realtor commissions, buyers don’t factor in how this impacts the final purchase price. These commissions are often included in the price by the seller, indirectly affecting the cost.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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