Before going through your first home buying experience, it’s easy to assume that the financial obligations of each party are fairly straightforward: The buyer pays for the house and the seller, well, sells it.
The reality is a lot more complicated. Buying and selling real estate comes with a host of legal requirements, inspections, fees and insurance policies that all cost money. Who pays those costs can vary depending on the agreement between buyer and seller, but most transactions are handled in a similar manner.
Here’s what you need to know about the extra costs associated with the home buying process and which party is generally responsible for each.
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A home warranty is like an insurance policy for appliances and major systems, such as plumbing and air conditioning. These policies generally cost $350 – $600 a year, not including the per-visit deductible.
This is an optional expense, but the seller may include it to sweeten the deal. The seller usually won’t include a home warranty if the housing market is hot, in which case the buyer needs to decide if they want to purchase a policy.
In almost every home sale, the seller pays the real estate fee to their agent, who then splits it with the buyer’s agent. The fee is usually 5 – 6% of the home’s final cost.
Sellers who don’t use an agent can still offer to pay the buyer’s agent a commission, usually 2 – 3%. It may be hard to find a buyer otherwise, because agents won’t facilitate a purchase without earning a commission.
A land survey determines the exact legal boundaries of a property. Although it may seem obvious where a property line ends and begins, there are instances where a homeowner surpasses their legal dimensions. This can result in a complicated and costly legal headache.
Land surveys are most common for new houses and usually aren’t required for existing structures. The cost ranges from $200 – $1,000 and is generally paid for by the buyer.
Unless the buyer and seller have come to a different arrangement, most homeowners are required to leave the house relatively clean when they sell it. This includes removing all belongings, throwing away trash and basic tidying up.
Sellers can hire professional cleaners, but that’s a personal decision. It’s not on the buyer to recoup any cleaning expenses.
A deep clean costs $200 – $400, but may be more depending on the state and size of the house. Smaller cleaning companies may charge less than national chains.
The term “closing costs” refers to an assortment of expenses that are usually paid for by the home buyer.
The appraisal is the cost to get the home and land value measured by a professional appraiser. The average cost of an appraisal is $300 – $650.
The home buyer pays for the appraisal as well as any additional appraisals if the value comes back lower than expected. If the appraisal value is lower than the sale price, the buyer either has to pay the difference or negotiate with the seller for a lower asking price.
A home inspection is conducted by an independent inspector to see if the property has any major outstanding repairs or problems. A home inspection costs $200 – $500 and is paid for by the buyer. The price may be on the higher end if the buyer requests optional services such as a radon, mold or lead test.
Some buyers may also want to pay for a sewer scope, which will examine the pipes with a camera to scan for potential issues. This usually costs an extra $250 – $500, but can save thousands if the pipes are degrading or heavily clogged.
Title insurance is an insurance policy that covers the legal costs of a title dispute on the house. This can arise if a previous homeowner died and left the home to an heir, legally entitling them to the house.
There is a separate title policy for the homeowner and one for the lender. The home buyer pays for both policies, which usually costs .05% – 1% of the loan.
When a buyer puts an offer on a house, they have to pay an earnest deposit to confirm their commitment to buying the house. This money is put in an escrow account, where it’s held until the sale is finalized. If the buyer rescinds the offer, the earnest money is then transferred to the seller.
The cost of an escrow account is 1 – 2% of the sale price. The buyer and seller usually split this cost 50/50.
