Buyers closing costs are an unavoidable cost of buying residential real estate. Buyers need to make sure that funds are set aside for closing costs in addition to the down payment. When buying a home cash the closing costs are not as much. That’s because there is no mortgage and many of the buyer’s closing costs on typical purchases come from the mortgage side of the deal.
Eight Common Buyers Closing Costs & Ownership Expenses
Until you decided to buy a home there are no costs. Once you have chosen a home and have an agreed contract, your closing cost expenses start. The first costs are home inspection fees and any other inspections you chose. We highly recommend that as a minimum you have a home inspection and a Radon Test. As the buyer this is your cost and you need to pay for the service when it is carried out. The cost varies depending on the time it takes but a good ballpark is $350 to $500 for the general inspection and $200 for a Radon test with 2 meters. Larger houses may need more meters.
A home inspection evaluates the construction and general condition of the home, the driveway, landscaping, drainage, checks plumbing, electrical systems, HVAC equipment, furnaces, smoke detectors and appliances. It’s a detailed report that provides information for buyers about existing conditions that need remedying and future conditions that are imminently in need of maintenance. Health and safety is a primary function of an inspection. It’s well worth every penny and while you can waive having one, it’s a standard part of our contracts and I highly recommend you do not do that!
Your Radon test will measure Radon particles in the air, the result being measured over 48-72 hours and the average being reported. The goal is to come in at or under4 pCi/L. (picocuries per liter). Many buyers seem to be foregoing a Radon Test. If you work with me I cannot insist that you have one but most of my buyers do, once I fully explain the ramifications of skipping one.
These are the fees charges by mortgage lenders and third parties related to the purchase of your home. You’ll see charges for checking your credit report, a loan application fee to process your mortgage, an appraisal fee to assess the property value, and when you close it will be in a title company office and there are fees to actually close your loan, provide the funding and close the sale. There’s also title insurance for mortgages.
All lenders and title companies have different rates and so there is no standar
d amount I can quote here. Expect to pay somewhere between 2 and 5 percent of your purchase price. Most closing costs get paid at closing.
- You’ll also have an attorney fee which averages between $500-$600, many attorneys take their payment at closing but some do not.
- An appraisal fee is going to cost around $500. (2017). This usually gets paid upfront.
Get estimates from mortgage companies to save money. Lender’s costs vary quite a bit. Just remember it’s about the service you get for the money you pay. Cheapest does not mean best but nor does most expensive. A referral from a REALTOR® is a great choice for deciding which lender to use.
A mandatory requirement for homeowners buying a home with a mortgage is to have homeowners insurance in place and paid for at time of closing. Insurance policies are more buyers closing costs that are unavoidable. Homeowners insurance is not mandatory for cash purchases but frankly you would be insane not to have a policy!
Cash Buyers. Get this on your must do list before you close. In 2012 I sold a home in a cash deal. In 2014 I resold it for the buyers now sellers. I reminded them to cancel their homeowners
insurance policy. I got funny looks and then they admitted they never got one. This was a $1.4 Million house. My skin crawled at the thought!
Shop around again for the best price and coverage for you. Flood insurance may also be needed if you home is in a flood zone.
Most insurance policies cover both destruction of the real estate and your personal belongings as well.
If you borrow more than 80 loan to value you may need a mortgage insurance policy. There’s a down payment required and a monthly premium. The down payment is need to close your loan and buy the property. Here in Barrington it’s not common for buyers closing costs to include mortgage insurance as our market typically has larger down payments. If you do borrow more than 80%, ask your lender for options and costs.
HOA Fees & Real Estate Taxes
From the day of closing if your property has HOA fees you are bound to pay them. You should budget for these when deciding what type of property to buy. Our MLS sheets have this information.
From the day of closing you are responsible for the real estate taxes. At closing you will get a credit for unpaid taxes this year because we pay our taxes a year in arrear. Again remember to budget for this monthly cost.
Unpaid real estate taxes and HOA dues can result in foreclosure.
So you’ve bought your new home and it’s time to move. It may also be time to buy new furniture.
There are several moving options. Well known branded moving companies are often used for long distance moving. Having done this twice in the USA I know the cost can be high but most of it relates to the gas and mileage. It’s cheaper to buy your own boxes and pack yourself but that also can take a lot of time. You can also use local movers or do it yourself. Just consider the effort versus the cost.
For furniture just remember not to go out buying this until you close. Lenders want to review bank statements up to closing and if you’ve added more lines of credit or run down your bank balance, your loan may be denied right up to closing. So be safe and wait. Be sensible too!
Making it Yours!
No home is perfect, even new construction homes will be tugging at the wallet. You likely had a vision about things you want to change, colors for the walls, or drapes for bare windows. This is going to cost money so be sure to have some spare every month for projects small and large.
Remember that homes need maintenance too. It’s your home now, you have to take care of it. If things break, you need to have fix it. Home maintenance costs run around 1-2% of your homes value every year. Older homes may cost more. Why not set up a home fund for these expenses?
Once you are closed it’s your responsibility to pay the electric and gas bills, land line phone bill, cable or dish bill, internet service, trash collection and any other services you want. Moving up to a bigger home may give you a jolt in the increased cost. Monitor your monthly utility usage and look for ways to become more cost effective in your use.
What About Your Buyers Agent?
Your buyers agent’s commission is not part of a buyers closing costs. Our compensation is generally paid by the listing agent in agreement with the seller. There are a few other closing costs or transaction fees paid by the seller. These include as relevant:
- Well and septic inspections.
- Seller attorney fees.
- Title company fees are split according to transaction type.
- State and county recording taxes.
If you have any questions about buyers closing costs or need more specific information about certain buyers closings costs we are here to help. If you need a mortgage we can direct you to great loan officers who will explain their side of buyers closing costs to you.
Let Me Help You Buy a Home in Barrington.
For further assistance or to start your home search, call Corinne Guest, Barrington Realty Company at (847) 363-3686.
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About the author: “What Are Buyers Closing Costs?” was written by Corinne Guest, REALTOR and Managing Broker of Barrington Realty Company. With over 12 years experience working with buyers, we’d love to share our knowledge and expertise.
I service the following Barrington, IL, and Neighboring areas: Barrington, Barrington Hills, Lake Barrington, North Barrington, South Barrington, Inverness, Deer Park, Tower Lakes, Lake Zurich, Kildeer, Hawthorn Woods, Long Grove, Palatine, Fox River Grove, Wauconda, Cary, Algonquin, Dundee, Island Lake, Lake in The Hills, also known as the northwest suburbs of Chicago Illinois.
Are you a prospective Barrington home buyer? Are you looking for a top real estate agent for this community? I’ve helped many buyers move into the Barrington area over the years. I’d love the opportunity to help you now! Contact me for a no pressure chat, it can be formal or informal.