FAQ ~ Do Home Buyers Have Out of Pocket Expenses?

Real Estate Broker/Owner with MoonDancer Realty, Dillsboro,NC NC# 218097

One question we are frequently asked by buyers is “Will there be out ofFAQ pocket expenses for me when I buy a house or vacant property?”.

YES! YES! YES! Outside of loan associated costs, which are often rolled into the loan, buyers should be prepared to spend anywhere from $500 to $2,000 out of pocket BEFORE they ever see the closing table.

You’ve found the house of your dreams and are ready to make an offer on the house. Attached to the offer itself is an Earnest Money Deposit and possibly a Due Diligence Fee. There are no standards for these fees. In our area, many sellers like to receive 1% of the purchase price as Earnest Money, but I’ve seen offers accepted with as little as $500. The Earnest Money Deposit is credited towards the purchase price upon a successful closing. If you withdraw from the contract within your Due Diligence period, you should be able to expect a return of that money. You may also have to give the seller a Due Diligence fee. During a Buyer’s Market, with a good Buyer Agent there’s a chance one can avoid this fee but it’s not a given. This fee is negotiated between the two parties and comes off the purchase price upon a successful closing. If the Buyer doesn’t close, the fee is the sellers to keep.

Once there is a contract, Buyers can expect to pay for Home Inspections, Pest and Wood Destroying Insect Inspections, Radon Inspections and any additional inspections like water testing or lead based paint. The Home Inspector may also recommend inspections by licensed electrical, plumbing or roofing contractors. If the house has a swimming pool or fireplace, inspections of those amenities may also be in order. In our area, these inspections might run anywhere from $350 to $1,000.

Closings in NC are typically facilitated by attorneys and yes, there are fees for that service. Depending upon the price of the house and the complexity of the financing, this fee for the buyer may run anywhere from $500 to $1,500.

The Buyer’s lender will also charge fees outside of the “loan package” fees. Expect to pay an application fee, a credit report fee and the appraisal fee. The application and credit check fees are usually nominal…less than $50. The appraisal is usually $450 to $600 for houses under 4000 square feet.

It’s always a good idea to have a survey done of any property you purchase. Many states require sellers provide a new survey, but not NC. There’s a chance buyers might be able to split the cost with the seller, but they are under no obligation to contribute towards a survey at all. Depending upon the size of the property, surveys may run $500 plus.

Will there be out of pocket expenses for the buyer? Absolutely. Ask your REALTOR to review what you should expect to spend as a buyer. This is one area of the house buying process you don’t want any surprises...be sure to read Randy Mitchelson's comments in #6 below!

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Re-Blogged 1 time:

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  1. Allen Lomax 06/01/2012 10:02 PM
Real Estate Best Practices
North Carolina Jackson County Sylva
Independent Brokerages
Wake Up Brokers
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Advice for Buyers
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Exactlly. They shouldn't sell their home if they have to ask. ;p

Jun 01, 2012 12:47 PM #1
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Hi Mona, even if a good amount of seller subsidy can be negotiated, there will always be something that has to come out of the buyer's pockets. I find it interesting that you have a due diligence fee! That's not something you would find around here.. The Earnest Money is credited towards the closing cost in MD, not deducted from the price. A big chunk of the closing costs goes towards prepaids and then transfer & recordation taxes .. those can add up to A LOT around here! How about NC? 

Jun 01, 2012 12:56 PM #2
Gayle Rich-Boxman Fishhawk Lake Real Estate
John L Scott Market Center - Birkenfeld, OR
"Your Local Expert!" 503-755-2905

Mona~spelled out like that, boy they need a calculator! We don't deal with attorneys and we don't have due diligence fees. HOWEVER, it is of the utmost of importance to let my buyers know that they have a transfer fee of $1,000 at closing. Ca-ching!

Good job breaking it all down. And I like the  Green highlights!

Jun 01, 2012 12:57 PM #3
Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

What a great round up of the expenses a buyer can expect. This should be required reading for anyone considering buying a home, especially the first time.


Jun 01, 2012 01:23 PM #4
Clint Mckie
Desert Sun Home, commercial Inspections - Carlsbad, NM
Desert Sun Home, Comm. Inspection 1-575-706-5586

Hello Mona,

Nice way of putting all up front.

Buyers at times think there is nothing to buying a home. The inspections alone can cost a lot.

It all depends on how much and how many is needed.

Nice post. An eye opener for buyers who think it's a very easy and fast process.

Best, Clint McKie

Jun 01, 2012 01:30 PM #5
Randy Mitchelson,APR
iPartnerMedia.com #goipm & Homeland Heroes Home Loans - Bonita Springs, FL
First Impressions are made at First Click

Don't forget to remind clients to budget for out of pocket expenses of setting up their new home including:

-deposit to turn on power (usually a credit score driven decision)

-deposit to turn on water/sewer utility

-set-up of cable and internet service

-parking or bar code stickers for the vehicles (in gated  communities or condo/apt complexes)

...just to name of few

and that's before they buy their first new lamp, window treatment, throw pillow, etc. to decorate the place.

Jun 01, 2012 02:06 PM #6
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Mona. You have done a great job simplifying and explaining buyers closing costs. The due diligence fee is something I have never heard of before. Hmmmmmm

Jun 01, 2012 09:28 PM #7
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Educating buyers about the costs associated with acquiring a property should be the first step in the acquisition process! Enjoy your day!

Jun 01, 2012 09:38 PM #8
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Hi Laura, in this case...they are buyers!

Andrea, that will teach me to post when I'm tired.  The EMD is credited towards the purchase price...I've fixed that!  Due Diligence is new to our contracts and the fee is heavily resisted by buyers agents.  Same in NC for the closing costs, but since those are typically rolled into the loan, I was concentrating on "out of pocket" expenses.

Gayle, hello!  We don't have "transfer fees" but we of course do have state tax or deed stamps.

Gretchen, I just glanced at Randy's comment and he's right...buyers will have even more expenses upon the move in...I was thinking mostly about the pre-closing expenses.  Guess I'll be editing again!

Clint, that would be our job to make it easier...nothing we can do to make it cheaper.

Randy, great points.  I am so going to subscribe to your blog!  I hope you don't mind, but I'll be editing in your comments to my post.  Thank you so much.

Sheila, who'd a thunk...NC on the cutting edge!  Knowing our industry, the fee could just as easily disappear from next year's contracts.

Wayne, should go hand in hand with pre-qual!

Jun 01, 2012 09:56 PM #9
Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome
Mona, Excellent summary for all buyers. Brings new meaning to POC=paid Outide closing. Margaret
Jun 01, 2012 10:24 PM #10
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Mona, great post and almost missed it except for Allen's re-blog.   You owe him an Active Rain hug!

Jun 01, 2012 10:43 PM #11
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Margaret, thanks.  It helped me to write it out too.

Bob, that Allen Lomax knows where to find me!  Glad you caught his reblog.

Jun 02, 2012 02:52 AM #12
Allen Lomax
Steed Talker Realty is with two hours of Tryon International Equestrian Center and we offer the best properties in th... - Sylva, NC
WNC Mountain Homes & Horse Farms Specialists

Mona  -  Thanks for letting me re-blog.  I reblogged so I will have it handy as a reference.  Excellent article. 

Jun 02, 2012 04:36 AM #13
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Allen, totally my pleasure!

Jun 02, 2012 05:48 AM #14
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Mona Gersky

GRI,IMSD-Taking the mystery out of real estate.
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