Penny Seeds

Even if you’ve checked your credit, and ran the numbers you may still be under estimating the cost for getting your own home. Here’s a few things to look out for that may cost you a pretty penny.

The majority of the homes for sale right now are either bank owned foreclosures or short sales. A short sale is a house that is not quite foreclosed on yet. Typically the seller is making a deal with the bank that if they can sell their home, and recoup some amount of profit then the bank lets them out of their loan. With the great number of liability properties popping up this makes a good deal for the bank.

There’s nothing wrong with purchasing a short sale or foreclosure (I’m doing so right now!), as long as you’re aware of a few things.  Firstly, short sales are not usually quick dealings. You can offer anything you want, but the bank has to approve this offer before you can close. Depending on how picky the lender is this could take many months. If you’ve got time to wait like I do then this is no big deal for you. However, if you need to relocate sooner than later you may need to avoid this type of dealing, and search for regular listings that will close faster.

Secondly, you’ll want to be sure to thoroughly inspect a home before purchasing it. You should do this with any home you purchase, but certainly a foreclosure or short sale. When a person is losing their home it really gives them no reason to take care of it, and you can never be sure what type of damage or repairs the house has sustained in years past. If you’re working with a lender then you will most likely be required to hire a home inspector, but if you pay cash then it may be up to you. I would certainly recommend doing it even if you aren’t strong armed into it. As a side note if you’ve already signed a purchase contract, but the inspection reveals facts that could affect the value of the home that you were not previously aware of you can walk away.

Forgetting closing costs, and down payment here’s some other things you could be expected to pay for out of pocket. Depending on where you live all of these may not be the case, but it is in the state of Florida.

Home inspection $300

Home surveyed (Based on home square footage $80 - $200 a sq foot)

Property Appraisal ($250 -$400)

First year’s taxes (Varies depending on home value)

First year’s insurance premium (Varies by area and home value)

Escrow ($500 for your offer contract, and up to $2,000 after your offer is accepted)

Loan processing fee (I know Bank of America will charge you a pretty $400 to start working on your loan)

Mortgage points (If you mortgage requires points you could pay a couple extra hundred or thousands of dollars)

Private Mortgage Insurance $1,000 a year(If you don’t put enough money down your bank may make you get this to protect THEM.)

Some other factors you should be aware of that could save you big bucks are..

Buy outside the flood zone - Buying in the flood zone will make your insurance much higher. Not to mention you may actually flood!

Watch the property tax assesement - If you use a site like Zillow or even read the paper work that the realtor hands you then you can get an idea of the property taxes you’ll be paying. Similar homes can have very different taxes depending on what they’re assesed at. If your property taxes are $3,000 a year you’ll be paying about $250 a month, but if they’re $1200 a year you’ll make out at $100.

Check out the area - Buying in an undesirable area could affect you should you ever want to resell your home. Pay attention to your potential new neighbors - they’re property affects yours.

Wind mitigation - If you live in a high risk storm area like I do you may want to get wind mitigation. This is where an inspector comes to your property, and either gives you a passing grade or suggests repairs. If you get their seal of approval your insurance rates could drop dramatically. This could include things like a new roof or hurricane shutters.

Be aware of future repairs - If you buy a home that is hooked up to a well or septic system you could be spending a bundle to be hooked up to public utilities down the road. Sometimes the local government even makes it mandatory for you to do so! This can cost thousands of dollars.

Watch for association fees - Some communities may have fees you’re required to pay to live there. These could be anywhere from $50 a month to a couple hundred dollars a month, and aren’t always voluntary. These might be for lawn care, grounds maintenence, club houses, community pools, ect.

Make sure a “TLC home” is really for you - As hard as a real estate agent may try to convince you that a home only needs minor repairs make sure that it’s true! You don’t want to move into your home, and find out that “TLC” costs a lot more than you can afford or it’s work you can’t do. Make sure you have them elaborate on damages - if you don’t think you can handle more than small cosmetic details like paint, and carpet then keep looking.

Do a walkthrough before closing - In this long drawn out process you’ll want to make sure you walk the home again before you close to make sure nothing has changed. If you buy a home with no warranty (most foreclosures and short sales are) you’ll be stuck with repairs.

Be present for your inspection - You’ll want to know everything that the home inspector finds. Make sure you walk with him, and that you really learn about what you’re purchasing.

Tags: expenses, fees, foreclosures, home buying, housing market, real estate, save money, short sales