What are the Hidden Costs of a Real Estate Transaction? Be an Informed Buyer and Seller

What are the Hidden Costs of a Real Estate Transaction? Be an Informed Buyer and Seller

Posted by Brian Burke on Thursday, July 9th, 2020 at 9:27am.

Hidden Costs of a Real estate Transaction

The real estate industry can be a scary and confusing place for newbies. Even those with experience in the industry can still find it confusing to either buy or sell a home, as rules can differ from state to state, lending institutions all have their own protocols, and then there are the requests of the seller or buyer you are working with. Another thing that can come as a real surprise to both buyers and sellers are the hidden costs of a real estate transaction. These costs can be relatively small and minor, or quite high, even climbing into the thousands.

So, how can you be an informed buyer and/or seller? You can start by familiarizing yourself with the most common hidden costs.

Researching the Property Title

The last thing you want to do is enter into a real estate deal or transaction without first checking the title of the property. What this means is that you research who has the legal right to own the property and therefore sell it. Unfortunately, there can be liens or hidden claims on a property, which takes ownership out of the property owner's hands.

So, what’s the best way to check the property title? Hiring a title company like Bay Title Company is a great way to ensure the research is done correctly. This of course can be a hidden cost, as not everyone is aware of this essential step.

Homeowners Insurance

Homeowners insurance is absolutely essential to have, as it protects not just the property but the contents of the home. Obviously, this will range in price based on a number of factors such as the location of your home, the size of your home, the value, the value of the contents, and how much of a deductible you’re willing to pay.

Closing Costs

Then there are the closing costs, paid by buyers, which typically amount to 2-5% of the value of the house. This is something that buyers don't usually realize or remember to factor into the overall price of the house.Buyers need to be sure that the closing costs don't end up pushing them over their maximum budget allowance, so giving yourself that cushion from the start is wise.

So, what do these costs include? Typically it can include such things as recording fees, title insurance, mortgage origination fees, notary fees, surveys, and more.

Property Taxes

While this isn't part of the purchase price, it is important to factor that into the process. Property taxes are typically paid monthly and will vary based on location and the size and value of your property. For those purchasing a house for the first time, property taxes can be quite the shock, as some are very high.

It’s also important to note that property taxes aren’t a static expense. Your property will be re-assessed on a regular basis, often once a year, and that can result in higher property taxes. You need to be prepared for this scenario and be able to work it into your budget.

Not Just a Simple Transaction

The more you learn about a real estate transaction, the less simple and straightforward it can seem, and the hidden costs start to reveal themselves.

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Brian Burke | Broker | ePRO | Expert   | 303.955.4220 Office | 303.710.2609 Direct |  Brian@kennarealestate.com

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Listing information last updated on August 3rd, 2020 at 10:45pm MDT.