Hidden Costs of Home Buying

When buying a home, many people think they only need to have a down payment ready for closing, however, there are many other fees that have to be paid throughout the process. So what are these hidden costs, when are they due and how can you prepare for them?

Earnest Money:  Earnest money (EM) is a good-faith amount of money given to the seller (held by an appointed person - usually the seller's brokerage) to show that the buyer really wants the house while the buyer goes through the home buying process. This typically depends on the price of the home and is due within 3 days of a contract being accepted on a home. Usually this payment is paid via personal check or Trustfunds and typically it's paid to the real estate brokerage representing the seller. This check is deposited by the brokerage immediately so you'll want to make sure the funds are in your account before you drop off the earnest money check. Earnest money payment does go towards your down payment.

Appraisal: Typically the appraisal is around $300-500 and is paid to the lender via a credit card as soon as you go under contract.

General inspections:  We always recommend buyers do a general home inspection on a property. These range from $300-500 based on the size of the property and usually these fees are paid at the inspection on the day of the inspection.

Supplemental inspections: We often recommend clients do supplemental inspections on top of the general inspection.  Which supplemental inspections will be recommended vary on the type of property you're purchasing. Typically these inspections are done on the same day as the general inspection and are paid for that day:

• Sewer scope - Usually done on inspection day if there is access to the sewer these inspections typically cost $250. This will help determine if the lines are clear or if they will need to be jetted or even replaced.
• Termite inspection -  Checking for signs of termites is important because they can be very distructive. In our market this is normal for a seller to pay this expense. You will see an email from Jillian if the termite inspection comes back clean. You will ignore the invoice as it will be paid by sellers at time of closing.
• Radon - Radon is a naturally occurring gas which is a health hazard if the levels are at or above 4.0.  A radon tester will set up a machine that needs to run, uninterrupted for 48+hours to test for radon gas. They will check the machine's readings to determine if the levels are safe. The radon tester will drop off the machine either before the home inspection or on the day of inspection and pick up two days later. The cost for this is $100-200 typically in the Des Moines area.
• Chimney - In older homes especially, a chimney scan is a must. The tech will make sure the chimney is free and clear of debris, check to see if there are any issues with the liner, structure of the brickwork, etc. You will expect to pay between $100 - $200 for this inspection.  We always highly recommend this inspection if you're buying a property with a chimney.
• Moisture/basements - If you are buying a home with a basement or the general inspector gets any high moisture meter readings, it may be a good idea to hire a waterproofing company to come out and see what is happening and if any repairs are needed. Sometimes, companies won't charge for this service before the sale is complete, but be prepared for a small fee to inspect the situation to see what will need to be done to remedy any potential water issues.

The above is not an exhaustive list of supplemental inspections in any way, but is a list of the supplemental inspections are clients tend to have done the most.  Other vendors you may want to have come out would be roofers, painters, HVAC, flooring, landscapers, lead based paint experts, asbestos removal companies, mold testers, etc. as well as other contractors to get a good idea of fixes that may be pricey. Some places do charge measurement fees or quote fees, but will rebate them back after the service is booked. Make sure to ask us for recommendations for these services as we work with many of them on a daily basis. If you need help finding someone, we can also take that off your plate and find the best company/person for the job.

Closing costs and prepaids:  Usually the above items are the only fees you'll pay before closing. However, at closing you'll have to pay closing costs and prepaids on top of the down payment. Closing costs are typically 2% - 3% of the purchase price. Please ask your lender for an estimate of closing costs. In addition, you'll need to pay prepaids if you're getting a loan.  Prepaids are things like pre-paying 6 - 12 months of your homeowner's insurance at closing as well as several months of HOA fees.  Your lender can give you an estimate of both prepaids and closing costs so you know how much money to budget for on top of your down payment, earnest money fees and inspection fees.

If you have any questions about how much money you need to have to buy a property, please let us or your lender know!