Hidden Costs of Purchasing a New Home

When considering the costs of purchasing a new home, you may question whether you actually need a real estate agent. A real estate agent is a licensed professional who is authorized to conduct real estate business in their given state. They are educated in various real estate matters and have passed a state board exam in order to obtain their credentials.

Some real estate agents may be dual licensed, meaning that they can also practice law, and others are licensed notaries. Because real estate agents are licensed professionals, they have a duty of care and are held to a standard of care that is reasonable for real estate agents.

Agents have access to the Multiple Listing Service, or MLS, which allows them to locate residential properties the day they are listed on the market. They are generally knowledgeable about the housing market in their area, meaning that real estate agents frequently know the value of the homes being sold. Additionally, they know everything required throughout the home buying or selling process.

Real estate agents may perform some of the following duties:

• Process standard client forms and questionnaires;
• Review real estate contracts;
• Negotiate pricing up to the closing of a deal; or
• Showcase properties and guide clients through walk-throughs and open houses.

No law requires home buyers or sellers to use a real estate agent for their transactions. However, different states may have laws requiring a real estate agent’s involvement with the closing paperwork. In terms of costs, agents take a commission, meaning that part of the residence sale will be given to the agent.

While some people choose to buy or sell a home without the help of a real estate agent to reduce the costs of purchasing a new home, there are several rules and requirements involved in real estate transactions that may be better handled by a licensed professional.

If you choose to work with a real estate agent, you will need to sign a listing agreement, which is a contract between you and the agent. This determines the obligations and rights of the business agreement. A listing agreement will usually detail:

• The amount of commission that the agent expects as compensation;
• If the broker will receive the commission, or if they will receive a flat fee;
• The beginning and end dates for the relationship between the agent and the buyer or seller;
• The amount of time that the property will be listed; and
• The list price.

What Should I Know About A Property Before Purchasing It?

Before purchasing a property, you will need to learn about any disclosures on the property. Disclosures refer to any problems with the property, such as:

• Flood damage;
• Cracks in the foundation;
• Termites; and
• Property line disputes.

Although states’ requirements regarding disclosures vary, the property’s seller must reveal these disclosures to the buyer. Generally, the seller will complete a checklist of all the most significant and common disclosures. Sellers are legally required to disclose any major defects they know about, as the active concealment of a known defect is illegal.

In addition to the seller’s disclosure, prudent buyers should hire an inspector to conduct an independent survey of the property to uncover any defects. They may find problems that the seller was unaware of or did not disclose. Buyers have the right to place a clause in the purchase contract which states that the sale of the property is contingent upon the completion of a property inspection. The clause may also state that a qualified engineer or construction expert must complete the inspection at the buyer’s expense.

Ensure that there is no encumbrance on the property, which could prevent the buyer from obtaining the property’s legal title or even possessing the property. Encumbrances may include:

• Easements;
• Encroachments; and
• Other kinds of boundary and title disputes. Most encumbrances will be recorded and can be located at the county recorder’s office.

Related to encumbrances are mortgages and liens. Buyers should determine whether a piece of property has a lien or mortgage on it by doing a title search through the county recorder’s office. Alternatively, a title insurance company can check instead and provide information regarding any such encumbrances on the property.

What Are Some Of The Hidden Costs Of Purchasing A New Home?

Many homebuyers expect to pay for the down payment when buying a new home, as well as regular mortgage payments. However, there are some hidden costs that every homebuyer should be prepared to pay, such as:

• Home Inspection Fees: Generally speaking, the buyer must hire a home inspector to assess the house’s condition. This must be done before closing. If the home inspector discovers that the home requires major repairs or that the property has other fundamental flaws, the buyer may be allowed to back out of the sales contract without facing a lawsuit. However, this would largely depend on the contingency clauses in the contract;
• Property Valuation Fees: Lending institutions require the property to be appraised before they qualify for a mortgage. The buyer is most commonly the party that is obligated to hire the property appraiser;
• Property Survey: Lending institutions generally require an up-to-date property survey to qualify for a mortgage. Again, the buyer is most commonly in charge of hiring a land surveyor;
• Property Insurance: These costs will continue even after the purchase of the home is complete;
• Title Insurance: Lending institutions generally require the buyer to purchase title insurance in order to cover any title-related issues that may arise in association with the property;
• Taxes: Some jurisdictions assess a land transfer or property purchase tax based on the purchase price. The buyer must pay the tax;
• Adjustment Costs: The buyer may be required to reimburse the seller for any pre-paid taxes and utilities on the property; and
• Legal Fees: Hiring a real estate attorney to review listing agreements with brokers, offers, and purchase contracts before either party signs any documents is an additional cost. However, it may be worth paying to reduce the likelihood of other expensive issues arising.

Do I Need A Lawyer To Buy Or Sell A House?

Because there are many steps involved in buying or selling a residential property and some hidden costs, you should consider working with a real estate lawyer near you. Your real estate attorney in your area can guide you through the entire process and help you negotiate a price that is right for you.

Additionally, a real estate attorney can review listing agreements with brokers, offers, and purchase contracts before you sign them to ensure that your requests are met. Real estate laws vary by state, but your attorney can provide you with the insights and information that apply to your particular area and to your specific real estate case.

A real estate attorney will be best suited to help you understand your legal rights and options under your state’s specific real estate laws and will represent you in court as needed should any legal disputes arise. As was previously mentioned, a real estate lawyer is an additional cost, but it is one that can reduce other costs in the future.