Up Pops the Real Price Tag

At the End, Buying Costs Thousands More Than You Thought

Real estate agent Carol Temple vowed not to let her clients lose the sale. But she had to admit that the prospects looked bad: The buyers for her clients' home showed up at the closing table with a certified check that was $2,000 short of the actual amount they needed to close the deal.

And they did not have the extra money in their bank account to make up the difference.

"Me, the seller, the closing attorney, we all had a sour taste in our mouths because of this. The only ones who seemed oblivious to it were the buyers," said Temple, an agent with the Arlington office of Coldwell Banker Residential Brokerage.

This is an extreme example of what can happen when people are surprised by exactly how much money they need to buy a house. Buyers may agree to pay $400,000 for a home, but they will need to shell out more than that when it's time to close on the deal.

How much more? That depends. But a house's purchase price is just the beginning of what buyers must spend to get into a new residence. There are plenty of fees to pay on closing day, and more bills to come.

In Temple's case, the buyers came woefully unprepared for these extra costs and fell short of the closing costs on their loan. Fortunately for Temple and her clients, the buyers' agent agreed to drastically reduce her commission, thus lowering the amount of expenses on the sellers' side and allowing the sale to close.

But if that agent had been doing her job -- or if the lender and the buyers themselves had done theirs -- the situation never would have reached such a dire point, Temple said.

"There should never be any surprises at the closing table," she said. "Buyers should always know exactly how much money they need to close a deal. It should all be cut-and-dried by the time they sit at the closing table."

Mortgage lenders do provide buyers with a copy of what is known as a settlement statement, or HUD-1 statement, an official listing of the exact costs of the real estate transaction for both the buyers and sellers. Buyers, though, are only guaranteed access to this form from their settlement company one day before the transaction settles.

Real estate professionals across the region agree that buyers, especially first-timers, are sometimes unaware of the real cost of buying a home. Fortunately, they say, it's a problem that a little education can solve.

"The first time I meet with clients, they get so much information that their eyes start to glaze over," said Dennis Melby, an agent with the Bethesda office of Long & Foster. "But I do go over all the costs associated with buying. It's a continuous education process. Buying a house is something that most people will do at most three times in their lives. You forget all that goes into it after 10, 20 years."

The extra costs of buying a home aren't minor. On a house that costs $400,000, they can run as high as $8,000 to $16,000. That's why it's so important for buyers to budget carefully before they reach the closing table.