I like to plan for things in advance; especially when those things are financially related. Of course I can't plan for every financial scenario before it fully plays out, but I can at least try with certain situations. One such situation in which I laid out extra costs in my financial planning happened when we were considering purchasing a home. Being able to look to the future and add in certain costs before they arrive can make our home purchase process a bit easier to plan for and the financial future of our home ownership situation a bit clearer.
The following are a few of the items that I factored in to our costs well before they arrived and that made a significant difference in the overall cost of buying, owning and selling a home.
Real Estate Commission
We haven't tried to sell real estate "by owner" or do it ourselves through online home sale sites, and we aren't likely to try any time soon. This means that when we purchase a property, we'll more than likely have to pay a real estate agent commission upon the sale of that property. This also means that there will be a five or six percent chunk of the sales price that will be going toward paying a commission to the agent or agents involved in the transaction.
This is an important consideration to bear in mind when we buy a property as it can add thousands of dollars or more to the cost of eventually selling it later. On our first home sale this expense ran us close to $11,000 and a similar commission, should we sell our current home for what we bought it for, could run somewhere around $8,000 or more.
Closing Costs
Depending upon the location and type of sale, closing costs could run two to three percent of a home's sales price. With items such as unpaid property taxes, title services, attorney's fees, title insurance, recording fees, buyer credits, survey costs, and other expenses, our closing costs on our previous property ranged into the thousands of dollars. In fact, including county taxes (which due to the timing of the sale were over $5,000) and with a $3,500 buyer credit, our closing costs were more than $10,000 -- more than 4 percent of the home's $230,000 sales price.
Mortgage Costs
There are multiple aspects of taking on a mortgage that I consider before buying a home. This is part of the reason we purchased our most recent home outright. Not only is there the interest over time to be considered, which can be substantial, but then there can be the costs involved just to obtain the mortgage. The associated settlement costs for our first home -- things like appraisal fee, credit report fee, mortgage application, underwriting and processing fees, postage and shipping fees, etc. -- were over $1,400. While such amounts might seem like a drop in the bucket when we were paying nearly $300,000 for our home, they can add up to make a difference in just how costly a home actually is.
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