Interesting things are happening. Buyers are overwhelmed by the large inventory of motivated sellers, short sales and REO properties. In some cases, buyers are purchasing at a large discount of what neighbors have paid a few years ago. However, there are some additional costs to consider that may be overlooked when buyers get too wrapped up in just the purchase price alone.
If you are purchasing at distressed prices, the selling price may be discounted but not necessarily the assessments or taxes. I recently viewed two REO properties both in the range of $150,000, but the taxes on the second home was almost twice as much. You may have purchased significantly lower than your neighbors but your taxes may be very similar. Although there are exemptions on taxes that can be taken, if you are a part of an association, the entire HOA will need to have their property taxes reassessed together.
In some cases, homes have been winterized. For a proper inspection to take place, buyers may be responsible for de-winterizing homes and activating utilities for the inspection. Furthermore, if the transaction does not close, additional costs to re-winterize the home may be charged.
With some properties / sellers not offering disclosures, buyers may also want to consider performing additional inspections depending on the property type and location. Attorney fees may also change (depending on where you live as attorney and broker roles vary in different parts of the country).
Depending on the home’s condition, sellers may request for a rehab loan to be in place. A 203k loan which has become very popular recently, has a higher rate in addition to procedures that need to be met versus a standard FHA loan.
Some short sales need time for the lender to approve the offer. During which rates can change. FHA currently is making changes this coming October regarding the PMI which is increasing from .55 to .90. Those who are not under contract currently, or have filed a FHA case number may be hit with higher costs.
Sherwin L. Sucaldito, REALTOR®
Member of The Institute of Luxury Home Marketing
Member of the Real Estate Buyer’s Agency Council, ABR
Certified Residential Property Manager, CRPM