Important
Questions
Every Buyer & Seller Should Know
Will You Make Sure I Understand What's Going To Happen Before It Actually Happens?
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How Much Money Will I Need And When?
The amount of money a buyer (or sometimes a seller) will need can vary greatly, depending on the buyer, the transaction and the method of financing. There are some basic expenses a buyer can expect. Normally, the first expense will be the earnest money deposit. This is the money a buyer puts up as good faith to show that they are definitely planning on purchasing the property. This might range from a thousand dollars to five or ten percent of the purchase price, depending on the market the property is in, the terms of the contract and how badly the buyer wants the property. The buyer will write a check for the deposit when they are submitting an offer, and the check will be cashed as soon as the contract offer has been accepted.
Within the first week after the contract is accepted (probably within the first few days), the buyer will make their formal loan application. Normally at this time, they will pay for the appraisal and credit report (although sometimes the lender will have the appraiser wait until after the home inspection if there is a concern that the inspection may kill the deal). The credit report may be anywhere from fifty to two-hundred dollars, and the appraisal may be four or five-hundred. The home inspection will be done (and paid for) within ten to fourteen days after the contract is ratified, and might range from $250 to a thousanth of the sale price (e.g. a $390,000 sale price might be a $390 inspection). It may be higher. Rates for home inspectors and other service providers vary. If the buyer requests other inspections, most will be have to be paid for at the time the inspection is done (termite and pest inspection is usually paid at settlement).
Most other expenses are paid at settlement. Closing costs can range from almost nothing to thousands of dollars. The buyer may also make a downpayment. The downpayment is the cash applied directly towards the purchase at settlement. The percentage will depend on the type of loan, how much equity the buyer wants and how much cash the buyer has available. At my first meeting with a buyer, I find out their situation and goals, and give them all of their financial options. For a seller, I will also give them possible projections for how much they might to expect to get in their pocket after all costs have been paid. When a buyer or seller is getting ready to sign a contract, I will provide an itemized list of closing costs, and for the seller, I will give a seller's net to show how much they can expect if they accept that offer.