Buying A Home: The Extra Costs

Buying A Home: The Extra Costs
What is a real estate "appraisal" and do I need one?
A real estate appraisal is quite simply an analysis of the property determining its value. This will be sent to an underwriter as part of the loan process. If it's an all cash deal, there is no loan appraisal necessary. The buyer may even want to do an appraisal to make him or herself feel better about the value, but primarily an appraisal is required by the lender.

Who pays for a real estate appraisal?
When it comes to appraisals, in any transaction there are certain expenses that are seller's expense and buyer's expense. The appraisal definitely falls under the buyer's expense. It is something that is paid for not through escrow, but on the spot when it is conducted. This is instrumental in getting the loan approved. In other words, this goes off to the loan committee, otherwise known as the underwriter, who will review the file, again, credit, income, savings, appraisal, other factors and either they give a thumbs up or a thumbs down with regards to the loan approval.

What are the up-front costs associated with buying a home?
There are several costs associated with the purchase of a home that a buyer would inherit. Some are paid on the spot, meaning as they happen. Others are paid at the end of escrow--at closing of escrow. Some of the up-front costs would be the physical inspection, which is usually conducted in the first 7-17 days, and a buyer would be paying that right on the spot. The appraisal is something that is usually conducted also within the first 17-21 days. That is something that the buyer would be paying for. The vast majority of expenses in a transaction do fall on the seller's side, at least in my experience and in my state. This is all detailed in a closing statement at the close of escrow, seller and buyer both receiving one.

Which real estate costs are the responsibility of the buyer?
A buyer can expect to incur several costs on the process of purchasing a home. Some of the costs that they'll be looking at up front include, but are not limited to as the saying goes, appraisal fee and a home inspection fee. Fees that they are going to be paying later in the closing, at the close of escrow, would be whatever points that are on the loan, whatever other fees the bank may be charging for the processing of the loan. The vast majority of expenses, the larger expenses, are on the seller's side, which is good news for buyers.

Which real estate costs are the responsibility of the seller?
The seller is incurring the brokerage fee, which is perhaps the largest segment of the expense. The seller in my state, for example, is responsible for paying a county transfer tax, on occasion, a city transfer tax, and in certain instances there could be a city report. There's also a termite inspection that is, in my experience, a seller's responsibility. There are title insurance policies for each party, a seller and a buyer, so the seller has his own. So the vast majority of expenses on a transaction are on the seller's side, but at the same time, the seller is getting probably the lion's share of the procedes from the transaction.

What is the typical real estate commission?
I don't know if there is a typical real estate commission, but in my experience, in my state, it's usually in the five to six percent range. Again, that is the amount the seller is parting with on the sale, that five or six percent is oftentimes split 50/50 between a listing agent and a selling agent.

What are "real estate closing costs" and "title fees"?
When it comes to buying a home, real estates “closing costs” and “title fees” are a function of their lenders' agreement, so it's probably a better question for the lender, and that would be negotiated and agreed upon early. In other words; are we paying points on the loan, no points, what's the percentage rate, what's the incentive on the loan, what is the title insurance company? Therefore, again both “closing costs” and “title fees” are definitely lender questions.