1. Earnest Money
Earnest money is an unexpected cost for many first time buyers. Essentially, earnest money is a deposit that you include when you submit your offer to the sellers. By including a check with your offer, you show the sellers that you are serious (or "earnest") about buying their home. The amount of earnest money you should include varies, but it generally ranges between 1-3% of the home's purchase price. If the sale goes through, the earnest money you provided will be applied to your closing costs. If it falls through due to a failed contingency, you should get the money back without any penalty.
2. Home Inspection
The home inspection is a crucial part of the home buying process. This is when a certified home inspector evaluates the property from top to bottom and provides a detailed report on the current condition of everything in your home (foundation, walls, ceilings, roofs, HVAC system, plumbing, septic system, etc). The inspection report should reveal any potential issues with the property that may require expensive repairs. By getting these out into the open before the sale, you have the option of negotiating the cost of these repairs with the sellers into the sale or potentially back out of the purchase agreement altogether. At the very least, you will be able to move into the home well aware of any required maintenance. As the buyer, you will be expected to hire the home inspector.
3. Home Appraisal
The home appraisal is another crucial part of the home buying process (and another cost the buyer is expected to cover). The appraisal is an official assessment of the home's current market value, as determined by an appraiser. The appraiser performs a thorough walk-through of the property, evaluating everything that could add to or detract from the home's value. The amount of finished square footage, the amount of unfinished square footage, the location, the condition of the property, the quality of the construction, the amount of storage space, the quality of the landscaping, and the actual sale price of comparable properties are all examples of factors that can affect a home's appraisal value. The cost of the appraisal can usually be covered upfront or can be incorporated into the closing costs.
4. Closing Costs
Finally, you will be expected to cover the miscellaneous closing costs associated with a home purchase. The closing costs include the various expenses, fees, and costs accrued throughout the home buying process. Examples of these expenses may include:
- Title search
- Lender's policy title insurance
- Owner's policy title insurance
- Survey fee
- Credit report
- Closing fee
- Attorneys' fees (if applicable)
- Property tax
- Courier fee
- Pre-paid mortgage interest
- Homeowners association transfer fees (if applicable)
- Underwriting fee
They obviously vary from transaction to transaction, but the total closing costs generally range from 2-5% of the home's purchase price. In some cases, you may be able to negotiate with the sellers so that they will help cover some or all of these costs.
More Questions About Buying A House? We Can Help!
If you are considering purchasing real estate at the Lake of the Ozarks, contact Eagle's Nest Realty! With over forty years of combined real estate experience, our team has helped hundreds of buyers through successful closings. We would be more than happy to answer any questions you may have about the process!
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