Buying a property in South Florida, whether it be a primary residence, vacation home or investment property, is an exciting and sometimes lucrative experience. However, there are several hidden costs to purchasing a property to be mindful of. Accounting for these early on can help you avoid unwanted surprises, and will help make the overall purchase experience a positive one. Here are 8 potential costs to take into consideration when buying a property in South Florida.
Flood and Hurricane Insurance
Although we don’t have earth quakes and snow storms, South Florida is unfortunately no stranger to tropical storms and hurricane force winds. And any person who has experienced Hurricane Andrew will tell you the damage could be surreal. For this reason, never skimp on hurricane or flood insurance. Again, shop around and find the best deal on both. Rates will vary depending on the location of the property and proximity to the flood line.
Condo Application Fee
When purchasing a condo, most condo associations are governed by their own distinct bylaws. A typical application fee for renting and purchasing a condo is required by most associations, and can range from $100 upwards per resident or married couple. When deciding to purchase, ask your realtor what the condo board requires for the application process.
Home Inspection Fees
Home inspections are one of the most important steps in purchase process, and any responsible realtor will be able to recommend a highly regarded home inspector. Prices typically start at $250, but depending on the property you may want additional inspections which come at higher costs. For example, when buying a home with a septic system, it is recommended to hire a septic company to inspect the septic tank, not included in a standard inspection. At times this will require the tank to be pumped, to inspect the condition at the bottom of the tank. Alternatively, if the home is susceptible to termites, hiring a pest control company to inspect for evidence of termites and pest damage will come at an extra cost. Or of a leak was present in the past, adding mold testing to the standard inspection report is smart. It is better to pay nominal costs up front in an effort to negotiate the best price possible for potential pitfalls after the purchase takes place. Of course, every property and situation is different, which is why it is important to work with a seasoned realtor who has experience in the neighborhoods and types of properties you are interested in purchasing.
Whether moving across town or across the country, being mindful of the cost of moving in advance will allow you to best prepare for your home purchase. There are so many nuances that arise when purchasing a property, researching pricing and setting aside funds for the move removes last minute sticker shock. Typically, movers charge based on the number of bedrooms, so a great way to save money is reevaluate at the items you are taking, and decide if they are worth the moving costs. You may want to sell unwanted items on craigslist or a yard-sale, to help cover the potential cost of your move!
In South Florida, a lawyer is not required to complete the documents for preparing a home purchase. However, it is never a bad idea to have additional legal representation and protection, especially if your are purchasing on behalf of an LLC or are involved in a complicated sale. Lawyer fees vary, ask your real estate agent who they recommend. Or, call your local realtor board and see if they can pair you with a preferred law firm. And always ask what the price would be for the scenario of your purchase, such as a short sale or 1031 Exchange. Depending on the case, rates may vary.
When purchasing a home with a lower down payment, most lenders will require that the borrower purchase mortgage insurance. This is changed on a per points basis, and depends on your credit score and typical rates. Ask your lender for various scenarios at different down payment amounts. This is also a great question to ask lenders when initially shopping for mortgages, as the rates may vary from .5% to 3%.
Loan Origination Fee
Another fee to ask your lender about is the loan origination fee. This fee is typically a percentage of the loan amount. This is to cover administrative costs of setting up and processing the loan. This can be negotiated in the deal to have the seller pay for part of closing costs, which would mean less out of pocket at closing for the buyer. An experienced realtor will be able to assess if this would be a reasonable request based on other elements of the deal.
Purchasing a property with a mortgage usually requires an appraisal in order to determine the property value. The bank uses the appraisal to then decide what the maximum amount the loan should be (unfortunately, many deals are killed with low appraisals, but that is another story). The appraiser is independent from the bank, and is assigned at random, so as to avoid any coercion to the valuation. The buyer may be responsible for paying for the appraisal, so it is best to ask the lender up front.
Although these costs may add up, one of the major benefits of purchasing property in Dade, Broward and Palm Beach counties is that hiring an experienced and professional real estate agent comes at no cost to the buyer (the seller is responsible for paying the buyers representative the standard 3% fee). And most importantly, a great agent will be able to save you money on your purchase through comparable property research, aggressive negotiations and understanding local practice on how to protect their clients from unseen expenses.