First-time homebuyer's guide to unexpected costs
Thursday, 18 August 2016
Imagine the clarity and convenience if every real estate transaction had a sticker price, right on the listing, itemizing every closing cost to the penny.
But there are so many variables involved, such as the kind of loan, down payment amount, and negotiated price, that such a scenario is impossible.
The biggest surprise for a first-time homebuyer may be a tax bill if you live in a state that re-assesses the property when it's sold. Natalie Riggs, a real estate professional in Southern California, uses the example of Los Angeles County property tax, which is 1.25 percent. If a home previously that valued at $100,000 30 years prior sells for $500,000, the new owners will owe tax for the $400,000 difference in addition to the tax based on the $500,000 home. "This is a bill that knocks the socks off of first-time homebuyers, but I always let my clients know to expect this supplemental bill the first year," Riggs says. Other costs you might not have anticipated (and each jurisdiction has its own set of regulations, taxes, and costs) when closing a home deal could include:
- Courier Fee: Someone has to pay for document delivery.
- Transfer Taxes: A tax for transferring the title.
- Recording Fees: So that a city or county clerk can update files noting the sale.
- Pest Inspection: Sometimes required by lender to check for termite damage or other hidden structural integrity issues.
- Homeowners Association Fees: If you're moving into a condo or other property with an association governing body, you or the seller will be on the hook for providing the association's official documents.
All fees should be itemized and clarified by your lender, and if you have any questions about them, ask — and even try to negotiate. It's important that you understand what you are paying for before you sign any paperwork.
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