Beyond The Sale Price: Additional Costs To Expect When Buying Or Selling A Home

buying or selling a home

For most people, purchasing (and selling) a house is the largest financial transaction they will make. The purchase/selling price is the lion’s share of the transaction. While the prospect of buying or selling a home for hundreds of thousands of dollars is daunting enough… there are additional costs that come with buying or selling a home. Below we discuss the most common and relevant costs during the sale and purchase process.

Selling A Home

  • Closing Costs: Generally, closing costs can be from 1–2.5% of the sale price. You may also have to pay a prorated amount of property taxes and HOA fees.
  • Real Estate Commissions: When buying or selling a home, real estate commission fees are about 6% of the transaction. Both the seller’s and buyer’s agents split the commission.
  • Interior Painting/Staging/House Cleaning/Lawn and Landscape: The seller wants to make a good impression, and nothing says “buy me now” than a house that looks immaculate. A fresh coat of paint and proper staging can be the difference between selling ASAP or spending months on the market. Cleaning and maintaining the lawn and outside landscaping will also be necessary. The total costs will vary, but they may range from $1,500–5,000. It just depends on how extensively you decide to refresh your property. You can save some of the costs by doing it yourself (such as cleaning and lawn mowing). However, it’s probably best to leave staging and painting to the professionals.
  • North Carolina Excise Tax: North Carolina has an excise tax of $2.00 per thousand of the sale price. Typically, the seller pays this tax.
  • Attorney Fees: Although not always necessary (i.e. overseas or out of state purchases), these fees can run between $800–2,000.
  • Home Repairs: The costs of these will vary depending on the property’s condition. Your agent will also negotiate any repairs after obtaining an inspection report. Major home repairs can run into the thousands (for example removing and installing a new hot water heater). Smaller repairs such as minor paint jobs, installing light fixtures and replacing hardware such as knobs and pulls may be done by the owner.  
  • Title Insurance: Sellers are responsible for title insurance, which guarantees protection from title deficiencies. The cost is typically related to the property’s purchase price.
  • Utilities: The seller should continue to pay all utilities until closing.

Buying A Home

For buyers, the costs are a little different—but no less important.

  • Due Diligence Fee: In North Carolina, a buyer writes two checks upon signing the contract. One is for due diligence, and one is for earnest money. Due diligence is usually between $500–$2,000 depending on the purchase price. The seller may cash the due diligence check immediately (this permits the buyer to conduct inspections, and the seller in turn will take the property off the market). If the buyer walks away from the sale during the due diligence period, the seller keeps only the due diligence amount. But, the due diligence amount is credited toward the purchase price if the sale is completed.
  • Earnest Money: Once the due diligence period is over, the earnest money check goes into escrow, and the parties are moving toward closing. However, if the buyer walks away at this time, they will forfeit the earnest money. Earnest money is usually 1–2% of the purchase price. It is credited toward the purchase price when the sale is completed.
  • Inspection Fee: Most lenders require you to have a home inspection, which will confirm the house is structurally sound, up to code and livable. Licensed home inspectors conduct the home inspections. They will inspect the property literally from top to bottom, inside and out. The fees usually range from $350–900, depending on the size of the property.
  • Appraisal Fees: Lenders require an appraisal. This is a third-party estimate of the value of the property. Lenders usually have their own certified appraiser lists. This fee is non-negotiable. Depending on the size of the house and location, appraisal fees can range from $300–900.
  • Document Preparation Fee: This fee covers administrative costs for the time and preparation of loan documents by a lender. The costs may be between $50–200 but can vary by lender.
  • Loan Origination Fee: The lender charges this fee, which is normally 1% of the total loan amount… This is typically the largest fee for buyers.
  • Title Fees: The title will be transferred and recorded when you buy a home, with fees associated with the title search and recording the new title.
  • Private Mortgage Insurance: If the down payment is less than 20% of a home’s purchase price, buyers might be required to obtain private mortgage insurance (PMI). PMI protects lenders in case you stop making payments on your loan. This is a recurring fee but you may cancel once you have paid off more than 20% of the purchase price.
  • Misc.: Buyers are also responsible for credit report fees, prepaid insurance, prepaid interest and flood certification fee.

     


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