You’ve put in that offer, and now you are wondering… what other sorts of dollar signs are you going to be seeing out there?
If it is your first time to buy a home and your have been wondering what it is like, and now you think you’ve finally gotten the gist of it, but you still aren’t sure what happens, I’d love to share with you a little scenario so you can play along and get your head wrapped around this huge purchase you are about to make and understand what checks your are going to have to write and how often.
Okie doke, this is how things typically pan out in Northern Virginia Real Estate keeping in mind that no real estate transaction is ever a cookie cutter:
If you wanted to put in an offer at $560,000 and wanted the seller to pay for about $10,000 in closing costs, then you would be netting them $550,000 (you always have to think of what you are giving the seller entirely as a net). Something that I usually like to wrap into an offer is asking for them to pay for the termite inspection (typically required by the lender), which costs about $35-60 and we would also ask them to pay for a home warranty, not to exceed $400, just to make sure that even after you have your home inspection and things look good that you are covered under some sort of home warranty for at least a year. So, all in all, you are really asking them to give you back about $10,435 and get the house at a reduced price if you weren’t offering them full list price in this example. This is all pretty standard to ask for these days, by the way.
After you decide the amount you want to offer, in this case, 560,000, you would give me an earnest money deposit, EMD, made out to the title company of your choice, since in the State of Virginia the buyer has the choice of title company, in the amount of 1% of the purchase price ($5600 or more, if you wanted to make your offer stand out) and that check would be held by the title company(if the offer was accepted) until closing in an interest bearing escrow account and then ultimately applied towards your closing fees.
So, let’s say, in a perfect world that the offer is accepted with any and all contingencies that are laid forth and the contract has become ratified(a ratified contract is one that all parties have signed off on all aspects of the contract and agreed to the contract). A ratified contract is the trigger to set the contingencies such as your home inspection and your appraisal (ordered by your lender) into action because they are on strict deadlines in this contract.
Now, you may be wondering what other out of pocket expenses are you going to see before you go to close:
- You have to pay for your home inspection, which can cost $300-500 depending on who is doing it. I have several amazing inspectors I like to use and they all have different prices. You can choose who you want to use, but you have to know that you are under a deadline, and they have to be able to get onto schedule.
- You have to pay for your home appraisal, which can cost $450-500 and is required by the bank. You do not have a choice as to who is doing your appraisal, nor does your bank. This is an automated system that was instituted about 2 years ago when the lenders were giving money out right and left to people who shouldn’t have been getting loans in the first place. Now, lenders order appraisals through a bid system and an appraiser will be sent out in the order which it was received. Sometimes the appraiser isn’t even from the same State ( this happens quite frequently).
- Any additional closing costs (wiring fees, title fees, title insurance, prepaid HOAs, prepaid insurance, etc.) not covered by the seller subsidy; of course, this amount may vary. We would ask for a preliminary HUD1, which is the breakdown of the fees to be paid by you, but we won’t typically see that until about 2 days prior to closing, if we’re lucky and the title company has received everything from the lender… we can only hope!
Oh, but wait, there is more! Other things you would have to start working on once a contract became ratified:
- You would have to get your homeowners insurance set up to start the day of closing- this is typically prepaid and goes into an escrow account.
- Setting up utilities in your name which sometimes require a deposit- electricity, gas, cable, etc.
I can totally help guide you through this process. I’d love to know more about your situation. Give me a call or drop me a line here.
