Everyone also knows that when you buy a house you pay ‘closing costs’ and other fees.

This ‘down-payment’ and ‘closing cost’ money can be paid for in several ways: through Buyers, Sellers, or a ‘down-payment’ assistance program.

But ...it’s what you DON’T know about buying a house that may kill your chances of home ownership or hinder you from getting the house you want:

Buyers need to be aware of other ‘Out of Pocket’ costs they may have to pay in the course of a real estate transaction.

A: These are extra costs apart from down payment money or closing costs, and may be required by the Buyer’s lender, a real estate agent, or even the Purchase Agreement contract. Some of these costs may be optional for the Buyer but critical to winning negotiations or getting important information about the condition of the property.

Buyers not fully informed about Out-of-Pocket costs by their loan officer or real estate agent before they enter into a contract may be in

In fact, it is highly recommended that Buyers be as fully informed as possible about the entire cost of a transaction before they enter into any kind of agreement. Buyers should hire experienced Realtors (and Loan Officers) who can advise them about these costs beforehand.

1.Inspections ($200-300). These are the Buyer’s inspections–no one else’s. Although inspections are optional, they are very important. We recommend them highly, especially when you are buying an older property (15 years old or more). You will typically need to pay the Inspector at the time of the inspections. They will run between $200-$300, and may also include termite inspections. Buyers who wish to accurately evaluate the condition of a property should save their pennies and order inspections. They are worth it.

2. Earnest Deposit Money ($300+). This is money the BUYER agrees to put down (in the offer) as a kind of down-payment to evidence their ‘good faith’ about following

through and buying the house. But this money DOES NOT go to the Seller or Lender–it usually goes to the BUYER’s agent (or a third party) who deposits the money in a special account. If the deal closes normally, this ‘earnest money’ is credited BACK to the Buyer at closing, where it may be used for other expenses, like closing costs. Giving earnest money is optional, but... SELLERS consider it to be extremely important when considering whether to accept a Buyer’s offer. A good rule of thumb (for the Buyer) is to put down 1% of the sale price as earnest deposit money, if possible.

To sum up: depending on the price of the house, earnest deposit money might cost

the Buyer between $300-$2000 in out-of-pocket costs when making an offer.

3. Home-owners Insurance ($300-600). Everyone who buys a house needs to get this insurance to close. What confuses most people is this: while the Buyer’s normal homeowner insurance payments are usually included in their monthly mortgage payments, the Buyer usually must provide a statement of having paid ONE YEAR’s insurance in advance--at the close . This may cost Buyers between $300-$800. Buyers should shop for a good rate, and ask their Loan Officer if it is possible for this first year’s insurance to be included in their closing cost arrangements.

4. Mortgage Company Credit Check ($50). Most banks and mortgage companies will need to run a full-scale credit check on potential Buyers. This complete credit check will include reports from all three major credit-reporting agencies, and may cost Buyers $40-50.

5. Mortgage Appraisal ($300-400). Buyers are usually required to pay for a mortgage appraisal. This ‘appraisal’ is the Lender’s inspection and evaluation of the property, geared to determine the relative value of the house on the current market. Appraisals cost between $300-$400. This money is usually due before close to the mortgage company. Buyers are advised to ask their Loan Officer about the cost of this item and how it will be paid, before entering into an agreement.

6. Unexpected costs occasionally occur. There are many reasons for Buyers to be shocked with surprise costs in the course of any real estate transaction. These may include: changes or problems in the Buyer’s financing package; or, mortgage companies may insist that Buyers pay off certain judgements or bills; discoveries about certain aspects (or defects) in the condition of the property (for example, during inspections) that call for repairs or contract renegotiations; and occasionally, any parties involved may be surprised by unexpected settlement fees or lender costs as late as the closing date. Working with honest and experienced Realtors and Loan Officers can save you from a lot of these difficult situations, but they can protect their clients only so much. Buyers should be prepared.

Altogether, it is safe to say that BUYERS may need between $800-$1500 in “out-of-pocket cost” money to buy a house. While some of these costs are optional or may be paid for by so-called “down payment assistance programs”, Buyers should always be prepared to pay any surprise ‘out-of-pocket’ costs before close.

Prepared by: Chris Marchese, Realtor

Sherwood Realty

Phone: (Ofc) 241-0554 x13 or (Cell) 822-4417