10 Hidden Costs of a Home Purchase

Costs No One Warns You About

• Transfer tax/closing costs: In Pennsylvania, buyer closing costs are higher than in most other states.They include some fixed/flat fees and some that depend on the purchase price. In general, someone purchasing with a mortgage should budget around 4.5% (on top of whatever down payment is being made) for one-time, non-financeable closing costs. Because it’s such a large amount of money, the amount you must set aside for closing costs could affect how much you have to put down, which, in turn, could alter your mortgage and/or maximum purchase price. Talk to your local lender  about closing costs!
• Yearly home maintenance: While people usually make sure they are crystal clear on what their monthly payment will be (which typically includes the mortage, interest, homeowner’s insurance and property taxes) and some go as to far to estimate monthly utilities. Those figures are a great start, as far as making sure you’re budgeting properly. What many home buyers neglect to consider is general home maintenance. There are costs you’ll incur each year (like gutter cleaning, HVAC service plans and house cleaning) and then there are thing that only require attention every 15-20 years, but are big ticket items (roof, new furnace, painting, tree work, floor refinishing, driveway coating, etc.). So my advice is to, each year, put about 3% of the purchase price into an account reserved for routine home and property maintenance.
• Tree care/yard care: Having trees trimmed so branches don’t damage the roof in a storm is an often overlooked cost. You’ll also have regular landscaping maintenance including mowing, leaf blowing, snow plowing. Don’t forget that decks and patios need some TLC every so often as well.
• Inspection surprises: If you have a home inspection done and the seller does not agree to fix/credit money back for repairs, you may have to set some money aside to deal with the most significant issues. For example, if you discover that the boiler is still working, but “beyond life expectancy”, you may need to replace it in the immediate future. A new boiler could easily be $12,000-$15,000.
• Stucco issues on the Main Line: This one won’t apply unless you buy a house with stucco on it. However, if you do, you need to understand that we have a common problem with stucco in our area. Recognize that I’m talking about stucco that is the sheathing material on top of wood frame construction. (Note: We have 100 year old homes here that are built of stone that may have a coating of stucco on top of them–that’s not what I’m talking about here.) In the late 1980s, we started to see new homes and additions to existing homes being built with stucco. The process and order of materia application, it was later determined, is crucial to ensure it prevents water penetration. Too often, stucco homes built between about 1985 and 2015 have had water penetration. In the worst cases, it can cause mold, the need for windows and door to be replaced, chimneys to be rebuilt and entire walls to be reconstructed. So….you’ll definitely want a stucco test and you’ll want to clearly understand any problems that are discovered and what they will cost to fix.
• Lateral sewer lines: The sewer line is the pipe that brings your waste water out of your house, under the front yard and into the public sewer under the street. Our area is old. The sewer lines are old. They were often made of terra cotta and that clay material degrades over time, especially with our plentiful tree roots making their way into them. It’s wise to have a sewer lateral inspection which includes a high pressured hose that pushes water through that is monitored by a camera directly behind it. This procedure allows you to see any blockages, accumulation of debris in the pipe or areas where water might be leaking out (which you don’t want). Cost to replace? Can be steep. Especially if you only find out it needs to be replaced after you have sewage that backs up into your basement.
• Septic/well vs public sewer and water: Just as a sewer line may present unexpected costs, if a property you buy has either a well and or a septic tank, maintaining those systems may as well. Having to relocate a well or put in a new septic system or drainage field is costly.
• HOA/Condo Reserves and Assessments: Keep in mind that condos and HOAs usually require a couple of months’ worth of “capital contribution” at the time of settlement. It’s almost always based on the monthly fee for the property. Once you live in a home with a condo association or HOA, you are subject to any assessments passed by the board. If the board decides all the windows need to be replaced, you may get a notice that you have a $20,000 assessment to be paid out over the next year, for example. It’s very difficult to get an accurate picture of upcoming assessments until they are actually passed by the board (at which point sellers must make that info public, so buyers know about them).
• Flood insurance: Pennsylvania has a high water table. Translation: lots of basement get water when the ground is saturated with rain/melting snow or if a home is very close to a creek. Be aware that a basement that floods due to outdoor conditions (vs. a pipe bursting inside the house) is not going to be covered by regular homeowner’s insurance. You’d need flood insurance. Also, if the property IS in a flood plain, the lender will require it. So be sure to look into the FEMA flood plain map and understand the ramifications.
• Wet basement: Piggybacking on the previous bullet point, we tend to have wet basements here. In most cases, a sump pump in conjunction with a French drain eliminates the problem (and not every house needs both). If a house you are looking at gets water in the basement, be aware of what’s involved in mitigating it. You’ll want to call a basement waterproofing specialist.

This list of hidden costs is not intended to scare you or discourage you from buying a home. Rather, it’s designed to help you by providing information you will need to make decisions about different properties. It’s vital to understand that there are costs beyond the monthly mortgage, taxes and utilities to maintaining a house and it’s better to be thinking about those costs before you buy than being surprised by them after you own.

If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973