Buying a home can be an overwhelming process if you let it. The more you know going in, the better you can manage expectations. When you are saving up for that down payment, keep in mind the “unexpected” costs of buying a home.
(Disclaimer: the estimates you see below are approximate typical prices that we see in today’s market. These can change at any time due to many variables!)
Earnest Money Deposit – usually about 1-3% of the purchase price.
When your offer is accepted, your earnest money deposit is usually due to the escrow account within 3 business days. This money is a “good faith” deposit, and shows the seller that you have some skin in the game. At close, this money is generally put toward your down payment. If you decide to cancel the contract, you can usually get this money back as long as you have contingencies in place. Keep in mind that these funds will be taken from your account and deposited into the escrow account immediately.
Home Inspection – typically about $400-600 depending on the inspector and the size of the house, payment due at time of inspection.
During the inspection period (typically first 17 days of the contract), we highly recommend that all buyers get a home inspection. A good home inspector has seen thousands of homes, and will look for things that normal people don’t see. You should be present for this inspection (usually takes 2-3 hours) so the inspector can walk you through the home and show you things to keep an eye on and major items that need fixing now. The home inspector does NOT tell you whether you should or should not buy the house, but they will help you make a more informed decision. The home inspector will provide a detailed report of the findings and will indicate if further inspections by qualified professionals are needed.
Further Inspections – can vary, payment due at time of inspection.
Home inspectors are NOT licensed in all trades. Often times further inspections need to be done by licensed tradespeople. Here are some common inspections that we see:
Pest Inspection – typically about $100
Roof Inspection – typically free
Sewer Inspection – typically about $150
Chimney Inspection – typically about $250
Pool Inspection – typically about $200
General Contractor – typically about $150
Repairs – can vary
Once you find out everything that’s wrong with the house, you’re probably freaking out. You’re wondering if you should even buy the house or if you should back out of the contract all together. Take a deep breath here. Keep in mind that no house is perfect. Most times, the seller has been living in the house all this time and everything was fine. Many minor repairs can be done by you with a little elbow grease. If there are any major repairs that need to be done, there are options for renegotiation with the seller. However, the seller does not have to agree to any of your requests for repair. Be prepared with a little wiggle room in your budget to make repairs before you move in or throughout your years in the home.
Appraisal and Lender’s Fees – can vary
On the loan side, you will need to pay for an appraisal. The lender hires an appraiser to value the home. Most times, the lender will not see any of the inspection reports that you get. They rely on the appraiser to be their eyes and ears at the property. The appraiser looks at the comparable homes and the apparent condition of the home to assess a value to the property. The lender will then lend you the money based on the appraiser’s opinion of value.
Other lender fees that you may have are processing fees, underwriting fees, funding fees, and a credit report. These will vary based on the lender, but will be disclosed to you before you sign the paperwork. These fees are usually taken out of escrow, so they are due at closing.
Insurance and Taxes
Homeowner’s insurance must be secured before close of escrow and vary by insurance company. Property taxes are disclosed during the inspection period.
Title & Escrow Charges – usually about 1% of the purchase price, split between buyer and seller
It is customary in Sacramento for buyers and sellers to split title and escrow charges, but this is negotiable. These are also taken out of escrow, so they are due at closing.
All in all, the homebuying process can be quite expensive. But the satisfaction of being a homeowner is PRICELESS!