It is hard to get around the fact that buying a house is an expensive venture. If you are new to this world, you may not realize that aside from the actual house cost, there are additional things that you have to foot the bill for as well. This post explores six extra monetary factors that you have to account for when you are buying a property.
Option to Purchase Fee
First, let us explore the Option to Purchase fee (OTP). This is a legal contract between you, the buyer, and the prospective seller (i.e. the current property owner). Upon signing this contract you pay a percentage of the total value of the building. This can be no higher than $1000 for HBD properties or around 1% for private sale avenues. By doing this, you are securing a legal right to go ahead and start proceedings for the full acquisition of the asset. If you opt to not go ahead, the seller has the legal right to retain your money. This is in place to deter stop-start buyers who may back out from the sale for any reason. It protects the seller but it also protects the purchaser as no one else will be able to have an offer accepted once the OTP is established.
Buyer’s stamp duty is a tax held against the value of the property in question. For non-residents in Singapore, for example, ex-pats, this fee can be around 35% of the total value. You can find lots of helpful advice from PropertyGuru, a company that provides information about purchasing and selling property in Singapore. They have a handy guide on additional buyer stamp duty, an additional tax you are liable for as a resident or non-resident investing in property. This can be a cost of up to 35% of the value of the building in question and was introduced to manage the growing demand for property in the country.
Additional tax costs aside, another thing you will have to pay for is the legal fees associated with property sale contracts. These take up the time and resources of a firm and they have to be done correctly to validate the legality of a sale. So, it is an unavoidable cost and it is not capped in any capacity. This means that you will have to pay for contract drawing and signing and any other types of underwriting that may have to be done throughout the process. Expect to pay upwards of $2000, which is not just pocket change. This substantial cost is a necessity as, unless you are an expert in housing law and all things related, there is a call for professional assistance.
Next, we move on to survey costs. Surveys are a sensible thing to invest in before you put your money into any major property purchase. Most mortgage companies list it as a prerequisite for mortgage acquisition. Without a survey, you will not be able to ascertain the true value of the property as you will not be aware of any potential damage or work that needs doing. Surveys look at things like wall integrity, potential roof issues, mold, and dampness in a property. Aside from structural surveys, there are also things like garden surveys to assess established plant life such as trees and the like. Once completed, you will receive a detailed description of any damages in need of repair and a potential cost value of these jobs. These costs regardless of stature can be offset against the cost of the property as per the legal and moral responsibility of the original house owner.
Any property is put on the market with a valued cost from a professional. But did you know that your mortgage lender will more than likely demand to carry out their own valuation of a property to ensure everything aligns with their investment? This can cost anything from $1500 depending on the size of the property and the time spent during the valuation. Lenders need this information because there can sometimes be discrepancies in price agreements that need ironing out before approving the property loan. Unlike property retailers and surveyors, mortgage lenders have their own criteria concerning the housing they fund. You might never see the results of these reports; however, you are liable for the bill in the end.
It can be overwhelming to realize all of the associated costs that come with buying a property. However, it just means a bit more planning on your part. Some of these fees, such as surveys, can be rolled into the end price that you pay after securing your dream place and some of them, such as mortgage valuations, are required upfront. Regardless, it is a big commitment and something that must be adhered to meticulously so that you can secure the property without a hitch.