Buying a House: Hidden Costs and Trade-offs

Hal M. Bundrick, CFP®
By Hal M. Bundrick, CFP® 
Mortgage Rates Monday

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Highs and lows: Buying a house is replete with them. You’ll have great days, like when you find the perfect house, and not-so-great days, like when you learn your mortgage rate has gone up just prior to closing.

Getting ready to buy a home? We’ll find you a highly rated lender in just a few minutes.

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Homebuying can be full of “gotchas,” the stuff that will try to sneak up on you and trip you up. Keep your eyes open for these potential surprises.

Trade-offs and compromises when buying a house

A place of your own might be a three-bed, two-bath house with a sprawling lawn or a cozy condo with a patch of patio. Either way, it’s home. Finding your next address will be a process involving trade-offs and compromises. The condo with the great view has a creaking, painfully slow elevator. The house with the perfect kitchen has a master bath from the ’80s.

Paint colors you can fix, but a load-bearing wall is likely staying right where it is. When house hunting, you want to put yourself into the day-to-day of living in that space. Parking here, sleeping there. Will you get tired of climbing these stairs? And what if kids are on the way?

Curbed by a covenant

Many neighborhoods, subdivisions and communities have covenants — strict regulations that prohibit certain improvements, activities and uses of a property. (These are sometimes called CC&Rs, for “covenants, conditions and restrictions.”) You own the place; certainly you can put up an 8-foot privacy fence, right? Or a basketball goal in the driveway? Perhaps not. It might be restricted by the covenants of the homeowners association, or HOA.

Residential areas, condo associations and neighborhood associations can draft architectural and use standards as part of deed restrictions to protect the rights of many. These rules, along with applicable local zoning laws, can cover many things: pets, parking, appearance, personal conduct. Certain home-based businesses might be regulated or forbidden. Common areas might have a visitor limit. Parking in front of a property might not be allowed.

Before you buy, you’ll want to know what restrictions are in place and whether the home you’re considering is compliant. You surely don’t want to buy into an existing problem.

Hidden fees and other expenses

In addition to closing costs as well as one-time and ongoing expenses such as homeowners insurance and property taxes, there are some other add-ons to consider.

  • Homeowners association or condo fees: Not only can HOAs govern property aesthetics and use, they also usually collect fees for common-area maintenance and administrative costs. You’ll want to find out current fees, how often they’ve been raised in the past and whether there have been any special assessments. If your home falls under an HOA, you might want to attend association meetings to make sure your ideas are heard.

  • Flood and hazard insurance: Your lender may require the purchase of specialized insurance in areas prone to flooding or other natural hazards.

  • Major maintenance, such as periodic exterior painting and the occasional roof replacement.

  • The higher utilities that come with a larger living space.

  • Seasonal costs, such as holiday decorations, spring flowers and plants, miscellaneous home improvements, winterizing, yard care and snow removal.

Bear in mind some of these may also involve paying qualified pros to do the work: plumbers, carpenters, landscapers, electricians and handymen.

Real estate agent fees

The seller of a home usually pays the commission, which is deducted from the sale proceeds. Often that commission is split between the listing and buyer’s agents, so even your agent is paid from the proceeds of the sale.

All of this can be negotiated — in or against your favor — depending on how competitive the housing market is where you are. You might also be able to have some or all of the closing costs paid by the seller, though that’s not very likely in a hot market.

Fees that may be location specific

Specific fees vary according to where you live. Some states require that an attorney generate and review the paperwork for a sale. Of course, that can mean some hefty fees, too. Some jurisdictions have transfer fees; most have recording fees that are charged by the local court to record the mortgage. New York state has a “mansion tax” that is levied on homes valued at $1 million or more — as well as a suggested gratuity for the title company’s representative. That’s right, a tip! It’s customarily $100-$200.

Getting ready to buy a home? We’ll find you a highly rated lender in just a few minutes.

Enter your ZIP code to get started on a personalized lender match.


All fees will be estimated and provided to you prior to closing, but it can be a good idea to find out what’s common in your area by asking local real estate pros and lenders.

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