5 hidden costs that can appear after buying a house
Homebuyers are always aware of the initial costs associated with buying a home, but sometimes they don’t recognize some hidden costs that occur after the Settlement. The good news is that there are some quick ways to find out about these unexpected costs that may arise after the Settlement and handle them methodically and effectively. The following steps will help make that a reality:
Increased HOA Fees: When deciding to purchase a unit from a Home Owners Association (HOA), you will receive numerous disclosures during escrow regarding any and all HOAs owed, so those particular costs shouldn’t be a surprise. With that said, the fact that past due HOAs can add up over time can absolutely fall into the realm of unexpected costs. One way to stay informed about any changes with the HOA is to become an involved participant in your HOA (ie, attend meetings, sit on board, etc.). Obviously, the more you stay informed with the day-to-day activities of your HOA, the less you will be surprised by changes in HOA costs in the works. Another technique that may prove helpful on this front is reviewing HOA board meeting minutes and bulletins, which can provide information on any projected or anticipated proposals regarding HOA increase due, building repairs/updates, and how will be financed, etc.
General maintenance/unexpected repairs: One of the main reasons things like disclosures and inspections and the like exist is to reduce as much as possible the chances of buying a house full of unexpected repair costs. The first method of attacking these potential costs comes in the dual form of reading your inspection reports/disclosures and obtaining the necessary repair quotes that those documents produce, as well as purchasing a home warranty to cover any future problems. Other than that, using common sense and diligent financial planning can be your best friend. Keep an emergency fund so you have a little cache to draw on. Stay smart about insurance policies (if you live in an area with a high prevalence of flooding…look into flood insurance) and stay in touch with your homeowners insurance provider about what is and isn’t. it is covered. With any home comes a number of necessary maintenance costs. Such is the life of a homeowner. One way to lessen the blow of these costs is to maintain your home on an ongoing basis, which helps you avoid a larger, often more extensive, bill later. The best way to manage your basic home maintenance costs is to simply make a game plan for them. For example, find out what falls into the DIY/Home Depot category and what requires professional work. Keep a detailed list of the repairs/upgrades you’d like done in a given year, how much they would cost approximately, and when you’d like each task completed. As you might expect, the more you plan for these sorts of things, the less staggering the costs will be.
Utilities: When you buy a house, there are no longer any owners. You are the owner. Gas, water, garbage, etc. They are part of the home ownership. I would suggest asking the seller for copies of recent utility bills. Also, if you really want to see where you’re losing money/efficiency and where you can improve, do an energy audit on your home and minimize any leaks you may have when it comes to cold air, heat, and water.
Special Assessments: There are two basic types of special assessments that you, as a homeowner, should be aware of. The former are assessments imposed by an HOA on its members when the complex or building needs some type of major repair, or an unexpected repair, and the HOA simply doesn’t have the necessary funds saved. As mentioned above, the best way to avoid these kinds of surprises is to stay informed of your HOA and board activities. The second type of special assessments are those imposed by the State, County, or City (in addition to your property taxes) to fund things like parks, schools, first aid agencies, and street lighting. These types of assessments generally follow a city/district-wide vote, and you can stay in the loop by paying attention to those procedures.
Property Tax Increases – Find out as much as you can about your tax assessment and property taxes. Property taxes are based on the value of your home, so as your home value increases, so will your property tax. Also, take the time to fully learn about property taxes and how tax increases work. The more you understand how these things happen, the better you can project/predict any potential increases and limit unexpected costs.
As you can see, knowing the hidden costs that can occur after a home purchase is just as important as knowing the upfront costs. Understanding post-sale hidden costs will help mitigate the risks associated with buying real estate, and hopefully this article has helped identify some common hidden costs.