The Hidden Costs of Buying a Home
When you think of buying a home, what usually comes to mind? For most people they know they need a down payment ready for closing, but that might be all they think they need. 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 title compnay) to show that the buyer really wants the house while the buyer goes through the home buying process. In Billings there are one earnest money payment. And can typically range from $500- $1,000 and is usually due within 3-7 business days depending on how your contract is written. This payment is paid via personal check or wire transfer and typically it's paid to the title company representing the seller. It is deposited immediately so you'll want to make sure the funds are in your account before you drop off the earnest money check.
Appraisal: Typically the appraisal is around $700-$1000 and is paid to the lender from the buyer while under contract. The lender will reach out to you when they are ready to order the appraisal.
General Home Inspections: We always recommend buyers do a home inspection on a property for better knowledge . These can range from $450 - $600 based on the size of the property and usually these fees are paid before/on the day of the inspection. (Often the home inspector will allow for a payment after, but will not release the home inspection report to you until they have been paid.)
Additional inspections: We often recommend clients do additional inspections on top of the general home inspection. Which additional inspections will be recommended vary on the type of property you're purchasing. Typically these inspections are done on the same day as the home inspection and are paid for that day:
Sewer scope - Usually done on inspection day if there is access to the sewer these inspections typically start at a cost of $200. This will help determine if the lines are clear or if they will need to be rodded or even replaced.
Radon - Radon is a naturally occurring gas which is a health hazard if the levels are at or above 4.0. The home inspector will set up a machine that needs to run, uninterrupted for 48+hours to test for radon gas. He will check the machine's readings to determine if the levels are safe. The home inspector will drop off the machine either 2 days before the home inspection or on the day of inspection and pick up two days later. The cost for this is $100 typically in the Billings area.
Water testing - When looking at properties with drinking water on a well system, it can be important to make sure the water is safe for consumption.
The above is not an entire 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, structural engineers, 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 and include the appraisal fee mentioned above as well as title fees, lender fees and more. 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 a month- 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.
Real estate agent fees: Until August of 2024, when a home was listed on the MLS, multiple listing service, it was disclosed if a seller/ listing agent was offering compensation to a buyer’s agent (the real estate agent representing the buyer), and for how much. This amount offered is no longer disclosed on the MLS so a buyer’s agent now calls and asks if the seller is offering compensation. In the event that the seller isn’t offering to compensate the buyer’s agent then it will be between the buyer and buyer’s agent of how the agent will be compensated. All compensation is negotiable and there is no fixed rate. Talk with your real estate agent about what that fee could look like so that you can budget accordingly.
