If you are currently looking for a new home, it’s not just the asking price you need to worry about. There are many hidden costs that you should prepare for and keep in mind, when buying a home.
Before making an offer on a new home
Before you make an offer on a new home, you should find out what the annual property taxes are on the home. Some towns have higher taxes due to a better school system, higher property values in general, and a great neighborhood. Even so, you should still take a look at the taxes and see if you will be comfortable paying them. The key thing to notice is what the property tax increases have been year-over-year and what the assessed value increases have been year-over-year if any. This would be a great thing to discuss with your realtor, and bank or mortgage company. If they have been going up at a high percentage, you will want to know if they are going to continue that trend and what may be causing the unusual increases.
Homeowner’s insurance is another hidden expense that can take you from comfortable, to very uncomfortable. You will want to know ahead of time if there have been any insurance claims against the home and what the current annual insurance premium is. Not only could this reveal a higher than planned cost, but it can also reveal hidden problems with the home. Take a look at this carefully and call your insurance agent ahead of time.
Utilities can often be overlooked when buying a new home. It is not something you would look at right away. However, if you were paying $200 per month for gas before and now you would be paying $450 per month, that’s something you would certainly want to know. Gas or oil, electricity, and water are all things that should be reviewed. If the new home is in a rural area, you may also want to find out if you have to pay for trash removal.
Negotiating the Purchase and Sale Agreement
Appliances in the Home
As you start negotiating the purchase and sale agreement, you may want to take a look to see if the refrigerator is going to remain in the house and that it will be part of the agreement. Otherwise, you may be spending a good amount of money for a new refrigerator. This should all be stated in the agreement.
Window coverings are usually included in the sale, but you will need to find out if the seller is taking them based on the purchase and sale agreement. If they are, this expense can amount to quite a bit. Especially, if there are a lot of windows.
During the Home Inspection Period
The cost of the home inspector will need to be paid upfront, and is during the inspection period specified in the purchase & sale agreement. Make sure you hire an excellent home inspector. When you call to book an appointment with a home inspector, make sure they are able to do three things; get on the roof, get in the attic, and get in any crawl spaces. If they are unable to do so, call until you find someone who can.
If the house has specialized equipment, such as a pool heater, water pump, a well or generator, you may need to get a pool specialist or irrigation specialist to inspect the equipment and see if they are in working condition. Most inspectors are unable to sign off on those kinds of things and they probably won’t even check them.
Old Repairs and Code Violations
Once you have the home inspection report, you will find out if there are any code violations that need to be brought up to code and if the home needs further repairs, as per the home inspector’s recommendations. Code violations need to get fixed by the seller during the inspection remedy period. If there are other suggested items to be fixed and you want the seller to fix them, you will have to put those in writing. However, they do not have to comply with repairing suggested items, so if they do not agree, then you will have to see how much it will cost to fix those items yourself.
As you review the inspection report and also go through the house on your own, it’s good to think about anything else you may want to do to the house. Are there things you want to fix or move? If so, you will need to factor these costs into your budget. (See Related: 5 Incredibly Cheap Ways to Remodel Your Bathroom)
Other Unexpected Costs
If the home has an alarm system already, what is the cost to take over the contract? This may not be a dealbreaker, but it’s good to know. Otherwise, you may end up paying an electrician to install a DIY home security kit in the home if you don’t want to continue with the current service contract.
A lot of people are kicking cable to the curb these days. But, if you want to keep cable, is the cable line situated in a spot that suits your needs? If not, you may have to move it and that will be an extra expense.
Furniture and Decorations
Do you have existing furniture that needs to go in the new house? Is it enough? Will it work with the configuration of the new home? Do you have to buy all new furniture? If so, you are in for a big expense. Take a look at what it’s going to take to fill the house with furniture and decorations and see if it’s going to work with your budget.
Will the home exterior or interior need to be repainted? If so, get an estimate beforehand and see if you can swing it in your budget. If not, you may have to wait on painting it or see if you can do it yourself.
The best way to budget for these hidden costs when buying a home is to do your research and plan ahead. This starts with your home search. Make sure you understand all of the hidden costs we just discussed when looking for a new home. It may save you some time and a big headache down the road.
Planning and budgeting for these hidden costs can alleviate some of your fears and make the home buying experience a lot more fun and exciting.