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Home Buying Costs

Now that you’ve wrapped your brain around becoming a homeowner, before you dive right in you should acclimate yourself with the costs associated with making an offer and many of the necessary inspections for your potential new home. Below we have outlined the common costs associated with making an offer and moving forward to the closing table.

Earnest Money

Earnest Money is considered good faith money, proves to the seller that you have skin in the game and have intentions of moving forward with the home purchase. An acceptable amount of earnest money is generally 1% to 2% of the agreed upon purchase price, however, the amount or percentage is negotiable just as the many other contract terms. The funds should be delivered to title company noted in the executed contract immediately and the funds should be sent either by wire transfer, personal check or cashiers check. The title company will hold the earnest money funds in an escrow account either until you terminate the contract or closing day arrives. If you should terminate the contract, the earnest money will be released to the appropriate party – either buyer or seller depending on when the termination actually occurred and for what reason. If you should continue onto the closing table, the earnest money funds will reduce the funds you will need to bring to the table.

Option Money Money

Option Money is what we call “thank you money” for the seller taking their property off the market. Essentially, the buyer is paying the seller to no longer market the home in the open market so the buyer can preform due diligence which includes various inspections completed during their option period. Option Money funds are also paid to the title company, but it is instantly delivered to the seller and is not returned to the buyer should the buyer elect to terminated the contract for any reason. If the buyer should continue onto a successful closing, option money funds should reduce the buyers out of pocket contribution depending on what was negotiated in the binding contract.  We commonly see anywhere from $300 to $1,000 or more for an option money in a contract.  The amount of option money is 100% negotiable, however, it is quite common for the amount of option money to directly to correlate with the number of option/inspection period days requested by the buyer – a lower amount for a shorter time span and a higher amount for a longer time span.

General Home Inspection

A General Home Inspection is highly recommended. This inspection is the process where a professional inspector spends several hours inside the home gawking and testing almost every gadget in the home you have agreed to purchase. They’ll spend time in the attic, on the roof, tinkering with appliances, evaluating possible foundation and drainage issues, etc.  As you can see, they rake over the home with a fine tooth comb and it is their job to be make the buyer aware of any known issue at the time of the inspection. A General Home Inspection cost can vary from inspector to inspector, but often the cost hinges on the size and age of the home.  It also can hinge on the fact the home has a pier and beam foundation rather slab foundation.  A rough estimate for a General Home Inspection, not including any other bells and whistles such as a pool or sprinkler system inspection, will run you anywhere between $300 to $500 or more… of course depending on the actual size.

Wood Destroying Insect or WDI Inspection

If your mortgage loan is a VA or FHA type, then a WDI or Termite Inspection will be required by your lender as part of the underwriting process. The cost of this inspection can range from $75 to $125 depending on which Pest Control Company or General Inspector you hire.  If you are purchasing a home utilizing Conventional financing or even with good ‘ole fashioned cash, then this additional inspection is optional. However, we highly suggest getting a WDI inspection as termite or other insect treatment could be $1,000 or more.  If you find evidence of current issues at the time of this inspection, your real estate professional will help you negotiate for the seller to tackle this issue rather than you forking over your hard earned dollars.

Septic Inspection

Septic systems are quite complicated and can be costly to replace so if your home utilizes a septic system, we encourage you to not forgo a septic inspection. There are two components to the septic inspection.  The first is the actual inspection and the other is pumping the sewage out of the tank. We believe both are critical components of a septic inspection. Most septic inspectors want to be present and inspect prior to pumping. A septic inspection can vary in cost from company to company but a buyer should expect anywhere from $250 to $350 just for the inspection. The pumping cost is quite tricky to estimate because it is determined on how much sewage is pumped from the tank.  A buyer purchasing a home with a septic system should budget at least $400 for pumping.  While this amount may be on the higher side or the seller could agree to pick up the pumping cost, it is wise to be safe than sorry and make sure you have ample funds to tackle all the necessary inspections for the home you are in the process of purchasing.

HVAC Inspection

If during the general inspection, the general inspector notes any current issues with the HVAC it is wise to further investigate by hiring a HVAC professional. Why? Likely the seller will be purchasing a home warranty that will replace or repair large ticket items such as electrical, plumbing and the HVAC. If you should be aware of any known issues at the time of the inspection, do not either have the seller correct them or correct them yourself by hiring a HVAC professional immediately after closing, the home warranty for the HVAC could become null and void. That’s no bueno in our minds! An HVAC inspection can cost anywhere between $50 to $150 depending on the HVAC company hired to fully inspect the unit.

Foundation Inspection

If during the general inspection, the general inspector notes any foundation shifting or cracking beyond normal for the area where the home is located, it is highly recommended to investigate further either by hiring a foundation company or a structural engineer. A foundation company could charge nothing to a minor service call fee, but a structural engineer can cost upwards of $300 to $500 for just their time to further investigate. Based on the scope of the inspection, your real estate professional will advise you which professional is better suited for you.


The appraisal is how the lender determines value for their mortgage underwriting and approval purposes. Without an appraisal, a buyer taking out a mortgage loan cannot purchase a home. Once all option/inspection period negotiations are confirmed, you real estate professional will give the loan offer or lender the green light to proceed with ordering the appraisal. A vast majority of loan officers and lenders require the buyer to pay for the appraisal prior to arriving at the closing table before it can be ordered. This ensures that if the transaction for some reason doesn’t move forward, the lender isn’t on the hook for the cost of the appraisal. The cost of an appraisal will be dependent on several factors such as the size of the home and what the appraisal management company charges the lender. A buyer should budget for approximately $500 to $1,000 for the cost of an appraisal or more depending on the state of the market.  However, it is best to speak with your mortgage professional at the time of application to get confirmation on this cost as it will vary from lender to lender.