Buying a home is a significant milestone for many individuals and families, but it’s important to be aware of the potential hidden costs that can lurk within residential real estate contracts, particularly in the state of Texas. Beyond the visible purchase price and down payment, various fees and expenses may not be explicitly written out but can add up quickly, catching buyers off guard. Let’s explore some of these concealed costs that buyers should keep in mind during their real estate journey in the Lone Star State.
1. HOA Transfer Fees: Homeowners’ associations (HOAs) are common in many residential communities, offering amenities and maintaining communal areas. When purchasing a property in an HOA-managed neighborhood, buyers often encounter HOA transfer fees. These fees cover the administrative costs associated with transferring ownership and typically range from a few hundred to a few thousand dollars.
2. Resale Certificate: A resale certificate is a document provided by the HOA that details the property’s financial and legal status within the association. This certificate includes information about outstanding dues, any pending special assessments, and whether the property is in compliance with the HOA’s rules and regulations. The cost of the resale certificate is typically borne by the buyer and can range from $100 to $400.
3. Taxes: Property taxes are a well-known aspect of homeownership, but buyers may overlook the timing of property tax payments. Depending on when the home purchase is completed, the buyer may be required to reimburse the seller for property taxes paid in advance for the period in which the buyer will own the property. This proration can lead to a significant expense at closing.
4. Title Policy: Title insurance protects the buyer and lender against any potential ownership disputes or claims against the property’s title. In Texas, the buyer customarily pays for the lender’s title policy, while the seller usually covers the owner’s title policy. However, this is negotiable, and buyers should be prepared for this cost, which can vary based on the property’s value. I usually see anywhere between .42 – .50 of the sales price of the house. For Example: $500,000 = $2,100 title policy
Navigating these hidden costs requires due diligence and understanding of the local real estate market. Engaging the services of a knowledgeable real estate agent and seeking advice from a real estate attorney can prove invaluable in identifying and clarifying these expenses. It is also crucial for buyers to carefully review the Residential Real Estate Contract promulgated by the Texas Real Estate Commission, as it may provide some insight into potential costs.
By being proactive and aware of these hidden costs, prospective buyers can better plan their budgets and avoid last-minute financial surprises. Proper preparation and thorough research will help ensure a smoother and more enjoyable homebuying experience in the vibrant and diverse residential landscape of Texas.
The values in this article are just examples and every deal will be different so consult your real estate professional, title escrow officer and mortgage officer to get detailed numbers for your transaction.
