Costs Associated with Buying a Property

There are costs to purchase a property beyond the price of a home. This blog is intended to be an overview of those costs. It is not all encompassing nor an exhaustive list and the information contained below may only be relevant to the Central Illinois real estate market. I recommend talking with a local real estate professional, whether it be a Realtor and/or attorney, to discuss what these costs may be for you.

In many instances, the seller who has placed their home on the market is offering to pay for all or a majority of the buyer's representation commissions and fees (this tends to be the trend whether the seller has Realtor representation or is selling the home for sale by owner). Even if this cost is not paid by the seller, it may be prudent for a buyer to obtain professional guidance for such a large investment?

Some real estate brokerages do charge buyer representation transaction fees or other fees above and beyond commissions for buyer's representation. You should ask what these fees and commissions are, who is responsible for them and under what terms are they payable prior to entering into an arrangement with your real estate professional.

If you are obtaining financing, you will need to contact a lender. A lender will assist you in determining an appropriate price range for your consideration, not only based upon credit worthiness and debt to income ratios, but your comfort level as it relates to payment goals. Based upon your financial situation, your lender will be able to provide you with a rough estimate as to loan origination costs, your monthly payment and what you will be required to bring to closing. In surveying various lenders in Central Illinois, I found that the average loan origination costs in this area to be under $2,000. Price of the home and type of loan programs can be large determining factors as it relates to loan origination fees.

You may want to consider homeowners insurance for your new property. Lenders, if you are using one, will likely require you pay for your homeowners insurance for the first year of your loan in advance of closing. According to reviews.com (updated 2/14/19), the average cost of homeowners insurance in Illinois is around $1,033 per year. Price of the home and various coverages are large determining factors as it relates to home insurance.

A lender will also likely recommend and may even require that a buyer establish an escrow account. As real estate taxes are paid in arrears in Illinois, the tax bill does not become due until the year after which taxes are incurred. It is typical for a buyer and seller to agree to prorate real estate taxes as of the date of closing. Given this, the initial funding of this escrow account is oftentimes offset by a real estate tax credit that the seller may provide to a buyer at closing for the real estate taxes owed by the seller.

A buyer might also consider if an attorney may be helpful throughout the process. Attorney fees vary greatly upon what services they are providing.

A buyer will most likely place contingencies in an offer to purchase a property. The most common contingencies associated with additional upfront costs are for inspections, determining property boundaries and appraisals. Below is a list of estimated costs for the central Illinois area for such items. The cost of these contingencies may be incurred by the buyer or seller depending upon the negotiation of these items and purchase contract.

Whole House Inspection - $300 and up. A whole house inspection typically includes an overall visual review of the property's structure, foundation, roof, plumbing, sewage, electrical, and heating/air conditioning systems to make sure these items are in reasonable working order. You should always check with your inspector to discuss the scope of their services and qualifications. Some inspectors will hire out portions of the inspection to specialized contractors. Size of a house and number of hvac systems are factors determining pricing as well.

Radon Inspection - $125 - $150 Radon is a colorless, odorless gas that is naturally occurring in the earth's atmosphere. Radon levels found inside a property which exceed four picocuries per liter are believed to be hazardous to our health and remediation is suggested.

Mold Inspection - $150 and Up. Mold is in the air around us, both inside and out. There are different types of mold and mold testing that might be considered. Consult a mold testing/remediation professional to discuss what types of testing are recommended.

Wood Infestation Inspection - $65-$85. Termites and other wood boring insects can do a lot of damage in a little bit of time. Many lenders make this a requirement to obtaining a loan.

Septic Inspection - $150 - $200. If applicable, a buyer may request a septic inspection. Many counties and/or lenders require this inspection.

Well Inspection - $150 - $200. If applicable, a buyer may request a well (which may include water capacity and flow) inspection. Many counties and/or lenders require this inspection.

The above by no means is not an all encompassing list of inspections and is largely dependent upon the property you are purchasing. For instance a buyer that is purchasing a property with a fireplace may want a fireplace inspection, a property with a pool a pool inspection, and so on and so forth.

Pin Marketing or Survey - $200 and Up. Although some people rely on observing pins or markers that may be found on the property or even a county's GIS site and maps, the most accurate way of knowing about the property you are purchasing is to have a pin marking or survey performed. Property markers can be moved and county records can be inaccurate.

Appraisal - $350 and up. Many buyers find comfort with an appraisal's value of the property being equal to or above to the price they are paying for the property. Lenders may require an appraisal (however, this cost may be accounted for in the cost of their loan origination costs).

Finally, there may be some minimal fees related for the closing services of the title company, an attorney's time for preparing the deed and PTax document, county recording fees, overnight fees, etc.

Although it may be easy to feel overwhelmed by the investment you are making to purchase a your new home, this investment will be well worth the cost and give you peace of mind for one of the most expensive and important decisions you will make in your lifetime. Keep in mind that in a world where most things seem to be negotiable, it is also negotiable as to who pays for the buyer's closing costs as well.

Dori DeWitte 3/13/19