Real Estate Investing: Closing Costs

Closing Costs Differ for Real Estate Investors by Jeanette Fisher Buying an investment house sometimes costs more for closing costs than investors plan. Beginning real estate investors sometimes don't get all the closing costs calculated before they make an offer to purchase. You want to make sure you have all your closing costs covered.  Nine most overlooked closing costs: 1.) Utility Service Fees Check your hook up and installation fees for water, gas, electricity, cable or satellite TV, phone, trash, sewer and other services. Sometimes the water department covers the sewer and trash service. These fees quickly add up and you don't want any surprises like a $340 water deposit required by some companies. In Southern California, we can get utility discounts for "show and sell" temporary turn ons. Check and see if you can move your utility service from house to house instead of constantly paying new fees.   2.) Insurance Fire insurance or a homeowner’s insurance policy usually needs to be paid for up front. Although you may be able to get an insurance binder from your company on a payment plan, most mortgage companies require the first year paid during escrow or closing, especially for investment property. Warning: Many insurance companies won't insure vacant houses. 3.) Appraisal Fees Mortgage lenders require appraisals to make sure your property covers your loan amount plus their investment risk. The buyer normally pays between $150-$450 to the appraiser. Warning to investors: Some appraisers try to charge more for doing an extra rental market appraisal, which you most likely don't need for a fixer. 4.) Survey Fees Some lenders require a property survey. You may also want a survey if the property lines are in question. Survey fees vary from $600-$2,500, or more for large parcels. Investor's buying out of state: If you're not used to this extra charge, don't be surprised if an out of state purchase requires a survey. 5.) Septic System Certification If your new property does not connect to public sewers, you may need a septic clearance for your lender. Often the home seller pays this cost, but you want to make sure you get no hidden charges or surprises. 6.) Water Quality Certification The same holds true for properties with a well and not public water service. For your own piece of mind, you will want to check the water quality and have this clause as a condition in your purchase contract. Not only do you want to make sure the water quality passes, you want to make sure the well has plenty of flow so you don't run out of water. 7.) Miscellaneous Origination and Loan Fees Your mortgage lender adds fees for processing your loan, document preparation, underwriting, closing, funding, and sometimes "garbage fees." Check your estimated costs statements and look for hidden fees. Before committing to a lender, shop for your best loan and compare lender's costs. 8.) Association and Maintenance Fees Most buyers understand that a condo comes with association fees. However, some housing developments also charge maintenance fees. Don't assume that the fees will be nominal. Many condos in California have association fees over $400 per month. Some of these fees need to be paid annually, which means a home buyer needs to pay upfront. 9.) Property Taxes and Assessments Home buyers often need to set up an escrow account with the new mortgage lender. This means that they must pay a portion of taxes upfront. In some states, the seller has already paid the local taxes and this amount must be paid back to the seller at closing. Also, some counties have transfer taxes whenever a property changes hands. Make sure you have all your purchase costs covered before you make an offer to purchase a fixer. You don't want to find out when it's too late that you need more money. Copyright © 2006 Jeanette J. Fisher. Jeanette Fisher teaches first-time home buyers and beginning real estate investors the six steps to home financing.   Real Estate Investing Business Plan Get all the tools you need to start your real estate investing business. Jeanette Fisher's "Make 2006 Your Most Profitable Yet!" Teleseminar Worry-Free FREE! Credit Help Teleseminar Learn how to finance multiple properties!   Real Estate Investing Articles by Jeanette Fisher How to get started investing in real estate. Read how a young, inexperienced person made over $100,000 her first year. Find "Bucks in Yucks" How to Buy a Bargain Doghouse   18 Steps to Finding and Buying Bargain Properties  How to Invest in Fixers for Flipping How to Find and Buy a Bargain House with Little or Nothing Down Next issue of newsletter, Doghouse to Dollar$ Real Estate Investors: Beware of “Subject To" Fortune Promises

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