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What’s the first cost you have to incur? INSPECTIONS. This is when you have the ability to inspect the property for any defects or needed repairs, and then decide if this is a deal you feel comfortable buying. Depending on the type of property and age of the home, a basic inspection can run you anywhere from $350 all the way up to $3000.
After you’ve done your inspection, you have to pay for your appraisal. Anytime you’re getting a loan from the bank, they will require an appraisal that proves the home is actually worth what you’re buying it for. Appraisals are usually done within a week after the seller accepts your offer, and usually runs anywhere from $400-$1000 for the most part depending how many units you’re buying, or if it’s just a single family home or condo.
While we’re on the topic of loans, the bank LOVES to charge you fees…lots of fees. Many banks will charge about half a percent to upwards of 1% of the loan amount as their origination fee. This means on a $500,000 loan, you could potentially pay $2500-$5000 as a mortgage fee.
Next, you have to make sure your insurance paid for by the time you close.
And by now, this brings us into our “Escrow” Fees…in some states you have “lawyers” who handle the transaction, in California we have escrow companies. In California, they typically charge $2 for every $1000 of purchase price, plus sometimes a base fee in addition to that. So on a $500k dollar home, you’re looking around $1000-$1500 plus whatever base fee they might have.
Then you have TITLE FEES. A title company ensures that the deed to the property can be delivered free and clear of all encumbrances and liens…basically, it means that you can take full ownership to the property without worrying that someone else is out there also claiming that they are the legal owner. I’d say this ranges anywhere from $500-$1200 depending on the type of property, title company, and what’s involved – again, there can be several factors that play into this.
And then…last but not least…you have miscellaneous fees that can add up. A $250 notary fee. A $65 overnight messenger fee. A $30 audit fee, etc…we can just chalk this up to an extra $500 in random, miscellaneous things.
You’ll see now that we have a wide range of expenses…here in California, I’m assuming the typical $500,000 house. Obviously closing costs of nearly $14,000 IS EXTREMELY EXCESSIVE, but it really depends on so many factors and what type of companies you opt in for, whether it’s single family or multi family, whether it’s owner occupied or for investment, what insurance you get, and whether or not you can negotiate these rates with the companies. I’d always recommend shopping around and negotiating to get the lower rate EVERY SINGLE TIME YOU BUY SOMETHING.
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