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9 Hidden Costs of Buying a Home

August 14, 2019

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Are you aware of the hidden costs related to buying a house? For the unsuspecting homebuyer -- moving to a new home like the Singular Ocean View Montecito Home pictured on this blog -- these hidden costs can be truly frightening. With the right Realtor™, some of the costs listed below can be negotiated during the buying process. That's why it’s crucial that you work with a seasoned professional.

READ: Cristal Clarke: The Expert in the Montecito Real Estate Market!

Remember, before you sign any document, check with your attorney or financial advisor. Make sure they are aware of these 9 hidden costs of buying a home:

  1. Earnest Money
    Earnest money is a sign that a buyer is serious about their offer. Think of it as a security deposit. You’re not going to give the seller money to demonstrate that you’re going to make an offer, and then just go buy somebody else’s house.

    Generally, buyers get the money back or put it toward the purchase on the home. Those who are taking out a loan must remember — if the financing falls through due to a problem on your end, you may not see that money again.
  2. Closing Costs
    Closing costs are usually 2% – 5% of the value of your house, which covers all of the fees a buyer pays at the closing of a real estate transaction. Unfortunately, there are a lot of them, including mortgage origination fees, title insurance, recording fees, surveys, notary fees — the list can go on and on.

    Many of the closing costs that buyers encounter are small. For instance, maybe you’ll shell out $25 for a recording fee to cover public land records. Other costs, like your home inspection fee, can run in the hundreds of dollars.
  3. Property Taxes

It’s easy to forget about property taxes because they’re usually lumped into your monthly mortgage payment unless you’re paying cash. This money is placed in escrow every month to cover your taxes. Keep in mind that during the first year of ownership, you could receive a supplemental property tax bill

“Here in California, this is an all-too-common occurrence,” said Beau Hodson, founder, and senior mortgage loan originator at Transparent Mortgage in San Diego. “We work to let clients know upfront about this possibility, but there are so many details during the home-buying process, this one is easy to forget.”

And, of course, your property taxes may go up over the years if the value of your home continues to increase. This will make your monthly mortgage payment higher. California’s overall property taxes are below the national average. Keep in mind, however, the average effective property tax rate in California is 0.79%, compared with a national average of 1.19%

4. Homeowner’s Insurance
Just like your property taxes, your homeowner’s insurance will likely be rolled up in your monthly mortgage payment and paid by your lender to your insurer. So, once you have figured out what your monthly payments will be, and you’ve added the property taxes and homeowner’s insurance, you can almost forget about these expenses. Almost. Unfortunately, like the cost of everything, your homeowner’s insurance premiums can go up.

5.  Funding The Escrow Account

Don’t be surprised if you’re asked to pay more than expected of your homeowner’s insurance and property taxes upfront. That’s because buyers are asked to pre-fund their escrow account in order to cover their first year’s taxes and insurance. This money will cover more than the estimated insurance and tax expenses for the following year.

  1. School Taxes
    The amount a buyer pays a county for school taxes depends on which part of the country they are moving to and the school district itself. The Treasurer, Tax Collector and Public Administrator in Santa Barbara County are independently elected by voters. They are responsible to receive, safeguard, and invest county, school, and special district funds; collect taxes and revenues; administer estates for county residents when required as public administrator; administer conservatorships for county residents when required as public guardian; and assist county veterans in obtaining State and Federal Benefits. 

READ: The Santa Barbara School District

  1. Moving Costs
    This one-time cost must be considered. Homebuyers can find the top movers in Santa Barbara and easily get estimates through Thumbtack.
    “If you’re hiring movers, a same-city move will cost around $1,000. However, a cross-country move will likely top $6,000 for movers alone,” said Tony Drake, a certified financial planner and the CEO and founder of Drake & Associates, a wealth management firm in Waukesha, Wisconsin.
  1. Home Maintenance and Repairs
    Homeowners should expect to spend from 1% to 4% of their home’s value each year on maintenance and repairs.
    “Some years, you may only spend a couple hundred dollars ... but if you budget for more, you’ll have that money set aside when you need a new roof down the road,” Drake says. “Even small maintenance projects, like yard care and gutter cleaning, can add up if you don’t budget properly. If you prefer a DIY approach for these projects, remember to budget for trips to the hardware store to buy paintbrushes, a lawn mower or other tools.”
    You’ll definitely want to have the funds to pay for repairs. Keep in mind, buyers who take care of ongoing maintenance will maximize their resale value when it comes time to sell.
  1. Utilities
    Think electric, gas, water, sewer, cable, telephone and internet. You’ll not only be making monthly payments on these but remember it can be expensive to set up the utilities due to the deposit many providers require. Those costs can really add up.

Thinking about all the hidden costs of buying a home can feel overwhelming, but working with the right agent can make it a little easier to swallow. But before you go buying a yurt, just remember that a lot of people buy houses and live to tell the tale. If you’re considering buying a luxury home in Montecito, or any of the upscale neighborhoods of Santa Barbara, give me a call at 805.886.9378 or email me at Ready to go house hunting?

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Client Reviews

“It was an emotional experience selling our mother’s home in Montecito that we all loved so much but Cristal made the process easier on our whole family by guiding us through the transaction every step of the way. She knows the market so well and everything she recommended was on point including the asking price, painting, and staging the home, which looked beautiful and helped the buyer envision her new home. We sold it the first day it hit the market with an offer above asking! Cristal did an incredible job communicating with us and the buyer to ensure that the transaction would run smoothly. We highly recommend using Cristal, she was a pleasure to work with! ”

- J & A

“Cristal is a pleasure to work with! Her knowledge of the local real estate market coupled with her amazing listening skills resulted in her showing us an array of homes that were all excellent choices. Her low-pressure patient attitude made us feel extremely comfortable with the whole process. I cannot recommend her highly enough.”

- M.F.

“Cristal Clarke is #1 in her field - and you don't become #1 by luck. Cristal works harder, and longer, and with more charm and patience than any real estate agent I have ever worked with in the past; her calendar has no weekend, her days have no clocks, her only concern is selling your property as soon as possible and for the best price on the market. Am I a fan? You bet!”

- P.B.

“We have used Cristal now several times and cannot express how grateful we are for her expertise, dedication, and unwavering support throughout the entire home-buying process. Cristal is knowledgeable, patient and attentive. Her attention to detail is remarkable, and she consistently went above and beyond to provide us with all the information and resources we needed to make informed decisions. Cristal is a skillful negotiator and advocate. She can navigate complex negotiations with professionalism and grace and felt like a true partner to us in the home-buying process. Cristal has a genuine passion for real estate and a deep commitment to her clients' satisfaction. I cannot speak highly enough of Cristal and her exceptional service. She is a true expert in her field and her dedication to excellence, combined with unwavering support is the reason we choose to work with her for all our real estate buying needs.”

- T.C.

“Cristal is a top-notch realtor who sold my home before it ever went on the market. I had two competing offers that enabled me to get top dollar for my home. Not only is Cristal superb but her team is extraordinary. I cannot say enough about Cristal and her team. They are simply phenomenal, the consummate professionals, who took care of every possible detail, making the sale and transition period, smooth from our end. They are also lovely, caring people, who knew all the right professionals, to get the job done. Thank you, everyone!”

- D.R.

“I could list lots of cool adjectives to describe Cristal. All good by the way. But, that is not why I or anyone should hire Cristal. My reason for hiring her, which proved to be correct, is very simple. She got the job done. And, she does it time and time again and with zero issues. And, that is why she is one of the top agents in the country. End of subject. ”

- M.A.

“Working with Cristal was a complete pleasure. Cristal was extremely patient with us as we evaluated nearly 2 dozen homes over a span of 2 years. Her knowledge of the market is unmatched. Cristal provided us with exceptional counsel as we evaluated opportunities and negotiated pricing. The closing process was handled thoroughly and efficiently. We could not be happier with our purchase and even more happy to now call Cristal our friend.”

- D.K.

“Cristal Clarke has conducted numerous real estate transactions for me beginning 13 years ago with the purchase of a Lemon Ranch. She has handled both large and small purchases and sales with equal dedication. As a negotiator, you can’t find anyone better. Her transactions are always conducted in the most appropriate and professional manner. Cristal has considerable knowledge of the Santa Barbara market.”

- S.N. Decker Ph.D.

“Living in Europe, we were to say the least, unaccustomed to the nuances of Real Estate acquisition in California and Cristal steered us through the process with absolute professionalism and personal attention to detail at every turn. Her in-depth knowledge of the market place combined with enthusiasm and drive was the only reason we secured the property of our dreams and will be forever grateful. If you are looking for personal discrete and private representation of the highest quality we suggest you look no further than Cristal Clarke.”

- Johan and Paula van den Berg

“Cristal is very straightforward, cheerful, helpful, professional and trustworthy….we felt very lucky to work with her.”

- John and Lacey Williams

“After considering our many choices, we are grateful it was Cristal Clarke of Sotheby’s International who represented the sale of our Montecito cottage. We are familiar with Cristal’s reputation of hard work and dedication to clients, but it was her attention to detail that made our experience so positive. She offered suggestions for staging the property, worked in harmony with potential buyers and was even able to secure back up offers. The sale of our cottage was completed much sooner than we expected, due in great part to Cristal’s professional skills and support. We highly recommend Cristal as a first choice for anyone needing representation with real estate.”

- Michael & Nancy Lee

“Our experience in working with Cristal Clarke resulted in the successful and discrete acquisition of a property which was not yet on the open market. Her knowledge of the Montecito/Santa Barbara area and vast expertise blended with her passion for real estate and architecture, provided us with the very highest level of professionalism and personalized services. Cristal exhibited a rare combination of excellent communications, attention to detail, creativity and patience.”

- Richard and Catherine Frinier

“Cristal really breaks the mold. She knows every nook and cranny of this real estate market, understands value, and follows up on everything, all the time. She was incredibly patient with our two year quest to find the perfect house. Every house hunting trip from across the country was well planned, and our time was never wasted. On top of her professionalism and expertise, she is delightful to spend time with. We are thrilled with the home we purchased, and grateful to Cristal for so wisely advising us through this process, right through to the close and beyond.”

- Laurie Siegel

“We met Cristal first in the course of renting a winter home (for three years), then buying a house using her as our agent. She was amazingly good at listening to our wants and showing us homes that fit our needs. Her mastery of the paperwork was perfect. Most importantly, there was never a situation where we doubted her straightforwardness or integrity. If we do another real estate transaction in Montecito (which I doubt, we’re happy with what we purchased), without question we’d use Cristal again.”

- Ken Saffir

“Susan and I just want to thank you for your efforts in the sale of our home. You are really quite amazing. Your competence, persistence, optimism and humor made the entire process effortless. Every problem that arose, you somehow fixed; any obstacle, you overcame. We have bought and sold many homes. It has never been such a painless and enjoyable process!”

- Michael & Susan Marquart

“A little something about “our” realtor, Cristal Clarke. My wife and I came to Santa Barbara about fifteen years ago looking for a seasonal home from which to enjoy the weather and amenities of the central coast. Being in the real estate business myself I was familiar with agents and brokers so entered the market with open eyes. We “flipped” a few houses in the early years, dealing with various agents and finally ended up in Montecito. That’s when good fortune put us together with Cristal. To say we were impressed is to put it mildly. Cristal really knows the market. She is familiar with the area, its history and trends. When we have questions about a particular property she either has the answers immediately or gets back to us by phone or email. There is no waiting or wondering with Cristal. She is an agent who is “on top of it.” Her recommendations as to price points, contractors, inspectors and title agents have proven to be exceptional, showing great insight and the highest professional standards. We consider ourselves exceedingly fortunate to say that Cristal Clarke is our realtor and would recommend her services to any serious buyer or seller.”

- Rob & Judi Kelch