9 Costs People Often Forget When Buying A House And Moving | Propertylogy

9 Costs People Often Forget When Buying A House And Moving

By on August 14, 2017

The process of buying a house and moving can be as mind-bending as one of Christopher Nolan’s movies.

There can be a lot of waiting and quick action. And a lot of times, you will be spending a lot of time waiting for a moment to quickly take action. The process then repeats itself.

With all these chaos going on, it is easy to forget about the expenses you will eventually incur with all your actions.

Maybe in a way, professionals in the real estate industry (the people who make a killing from property changing hands) create it this way so that buyers and/or sellers would be left with very little mental capacity to take notice of the expenses they are chalking up.

This may be either good in that it keeps your mind fully focused on the bigger picture of things without being distracted by these costs. Or bad because by the time you move into your new home, you could be facing foreclosure next week!

Jokes aside.

Here are some expenses that people often forget about when buying a house and moving into it. This also means that they might not have taken it into account until they get the bill for it.

Note that because of varying charges and fees in different areas, no specific numbers can be provided.

1) Securing the house

The days when banks were willing to offer 100% financing to purchase a house is long gone.

These days, the standard is 20% down payment. However, in certain instances, like when you have a fantastic credit score, lenders might be willing to compromise a little on that down payment requirement.

If by any chance you manage to impress a bank enough to accept a down payment lower than 20%, then expect to pay for private mortgage insurance. This can either be a one-time payment or a recurring fee like a typical insurance premium.

However, you might feel a little better if the lender grants you a lower interest rate than what is publicly available. These are common rewards for those with great credit records.

After which, you can also expect a lender to conveniently deduct an administrative charge from your loan account for the services rendered.

Sometimes the mortgage broker might even charge a fee for their services.

2) Selling the existing house

Unless you intend to keep your current house as a rental property, you will need to sell it.

In most cases, homeowners need to sell the existing house to finance the purchase of the new one. So this is an essential step in the home buying process. And in order to get the best price out of the house, you will need to doll it up one way or another.

This means you can look forward to estimated expenses on:

  • Door fixes
  • Window repairs
  • Basement cleaning
  • Fresh painting
  • etc

These costs can seem minute individually. But can really add up when summed up.

Yet don’t despair. Sometimes just a few cosmetic tweaks can get the house looking thousands of dollars better.

Remember to get advice and tips of home staging from your agent. If your agent has no clue, fire him and hire a more experienced agent in your corner.

3) Bridging costs

If you indeed require the sales proceeds of the existing property in order to pay for the new one, you might experience a time gap where you will not have enough funds to make the purchase.

This is because most families will secure and buy a new place before selling the current one.

This would require them to fund the purchase before the proceeds of the impending sale comes in.

Because this is a common problem faced by families who are moving, there are actually credit facilities conceptualized by lenders just to serve this need.

It’s called a bridging loan. Expect them to come with breathtaking interest rates and to be repaid within a short period of time.

4) Temporary accommodation

If you have made the brave decision of selling before buying, then surely you must have forecast that there will be a high probability of you being without a house for a period of time.

This would then mean that you have to either bunk-in with a relative or friend and pay them a rental. Or house your family and yourself in a hotel until the new house is ready.

5) Commissions

This is the one cost that can leave you tearing your hair out.

Because we don’t see what an agent does behind the scenes and in the office, we often fail to appreciate the value they bring to a deal. So paying them thousands of dollars just to be a “middleman” can really make a seller question himself.

But in most circumstances, the better you pay an agent, the better service you can expect.

In this case, you might want to set certain conditions to meet so that the agent really has to work to be paid what he thinks he’s worth.

However, do note that there are also many agents out there who charge premium commission rates for abysmal work and effort.

Commission rates can vary due to a number of factors like location, value of house, experience, etc.

Remember that they are always negotiable. An agent charging you a flat rate is just saying that to stop you from negotiating.

It is up to you to bring that down.

6) Mortgage redemption penalties

If you are many years into your current mortgage, the odds are that you are no longer in a “lock-in” period where you are liable to incur a prepayment penalty for full redemption of the loan.

Do pull out those credit facility documents and review the terms and conditions.

Are there or are there not any redemption penalty fees?

Depending on the amount of loan owed, the penalty charges you can incur can be in the thousands.

7) More miscellaneous charges

Remember we talked earlier about the professionals who make a living out of others buying and selling property?

This is where they make their mark.

Here is a list of some of the professions who will be making money from you between the time you decide to buy a new house and moving into it.

  • Real estate agents
  • Insurance agents
  • Mortgage brokers
  • Bankers
  • Home inspectors
  • Appraisers
  • Surveyors
  • Attorneys

On way or another, a portion of the money generated in the transaction will be used to pay them for services rendered.

8) Moving

There has been such a huge surge in demand for moving services that there are billion-dollar corporations that are solely in this line of work.

Projected expenses should include the costs of packing materials and services, labor for moving personal property, and transport.

If you plan to undertake the move yourself, be prepared to spend up to a thousand dollars for packing materials. And rent a truck and possibly a driver for the transport. That is without including the drinks and meal you will need to offer your friends as goodwill when they are helpful enough to help a friend (you) in need.

One word of advice.

Unless the trip is a very short one, try your best to limit the journey to just once. Going to and fro a few times can be a very tiring process even if you have paid for the rental vehicle for the full day.

9) Contractors

Don’t get me wrong. Nobody is going to miss out the remodeling budget set aside for home design work.

After all, one of the main reasons you are moving could be to move into that dream house of yours with a spacious kitchen, open outdoor deck, or luxurious bathroom.

But you must be kidding yourself if you think that an interior designer who quotes you $20,000 means that $20,000 is all that you will spend on the works required for the house.

Your expenses can easily rise due to a necessary change in flooring material because of a shortage. Or more labor-intensive work needed after the supervisor finds the condition of the house much worse that anticipated. Or additions you want to add as the house is undergoing the renovations.

All these is without including the extra works you deem necessary after the interior designer finishes the contracted scope of works or the up and down nature of relationship with contractors.

For example, you might find that the water heater needs replacing after moving in. Or that the basement has a mold problem that requires immediate rectification. Or the roof is leaking.

All in all, there is almost no chance for us to precisely nail down the total expenses involved in buying a new place and moving in. But be mentally prepared for them so that you do not run out of cash before completing the move.

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