Questions to Ask about Cost and Budget
For many people, a house is the biggest purchase of their life, which means you should ask a lot of questions before making an offer, including these.
1. What are your total costs?
Unless you’re paying cash, the sticker price of a house is not the actual amount you’ll pay. And even if you are paying cash, there will be ongoing costs you should consider to make sure your home fits into your budget. And one more note: you won’t usually know the final cost upfront because of the many unknowns that go into this process. But you can get a ballpark.
Typically, a house’s “total” cost includes the following:
- Appraisal: One of the first expenses associated with buying a house, the appraisal amounts to an expert evaluation of the property’s value. Expect to pay several hundred dollars on this.
- The property itself: This is the big fat number you’ll see listed on Zillow or Redfin. But be sure to consider the cost of both your down payment and your monthly payments: Yoni Pogofsky, managing broker with Pogofsky Real Estate Group, suggests asking how much you’re comfortable with as a monthly payment. “You don’t want to leave yourself house-poor by overextending your down payment,” he explains. Once you have a sense of what you can handle, ask your mortgage lender what your monthly payments will look like.
- Inspection: The inspection evaluates the condition of your future home. More thorough than an appraisal, its goal is to identify anything that’s not in good working order (and therefore might cost you a lot of money in the near future).
- Mortgage interest: If you borrow money to buy your house (i.e., take on a mortgage), you’ll pay for the privilege (in the form of mortgage interest). Over the lifetime of your loan, your interest rate can have a significant difference on the total amount you pay for your home.
- Mortgage insurance: If you opt for certain mortgage types that require smaller down payments, you may have to pay mortgage insurance every month.
- Homeowners insurance: If you have a mortgage, your lender will likely require you to carry insurance. And even if you don’t, you’ll likely want a policy to protect your possessions and assets. Read more about what homeowners insurance typically covers.
- Taxes: You’ll pay property taxes every year, though often on a monthly basis, rolled in with your mortgage payment. They cover things like local schools, road maintenance, and other essential services in your area. Make sure they’re in line with the taxes on other properties in the neighborhood. The current homeowner is probably your best source of tax information.
- HOA fees: Not every house has a home ownership association (HOA), but they’re gaining popularity and their fees can pay for anything from maintaining a communal swimming pool to insuring a common area. According to Terri Williams and Realtor.com, a typical HOA fee comes in at around $200 to $300 per month – but they can also be much higher for extreme luxury properties.
A few notes here: First, some of these costs are negotiable. In addition to knowing which questions to ask before buying a house, it helps to understand where you can use your bargaining skills to get a deal. If you’re new to the house-buying game, we recommend checking out Julia Dellitt’s guide to negotiable costs when buying a house.
Second, many of these costs roll into your closing costs. To get an idea of what your closing costs might be, try this handy closing costs calculator by SmartAsset.
Finally, be sure to ask yourself what your long-term plans are for the house and how long you plan on living there. According to Pogofsky, “This is an important question because it may dictate what type of mortgage you get, which can save or cost a lot of money in the long run.”
2. What’s included in the sale?
You know you’re getting the building itself, but beyond that, it’s not always clear. Before buying a house, ask this question to clarify what the sellers will take with them (window treatments? Appliances? Light fixtures?) and what they’ll leave. This helps you understand what costs you’ll have when you move in to make the home livable, and may affect what you’re willing to pay for the property.
Liz Steelman, real estate editor at Apartment Therapy, notes that, in most cases, “You don’t ask the seller directly. Most people ask their [the buyer’s] real estate agent, who then asks the seller’s agent.”
It’s usually best to get the sellers’ answer to this question in writing, especially if they promise to leave behind high-value items like a built-in sound system.
3. How long has the house been on the market?
Steelman recommends asking your agent right away how long the house has been for sale. “If it’s been on the market a long time, that often signals there are some issues with the property,” she says.
As a general rule of thumb, it’s not wise to make a low offer if the house has been on the market for 21 days or less. After 90 days, though, it may be safer to make a low offer (which, in this context, may mean something like 90 percent of the asking price).
Your real estate agent can guide you through best practices for houses that have been on the market for more than 21 days and less than 90, where the nuances of what to offer may be trickier to navigate for the uninitiated.
4. Why is the seller moving out?
This is a super-important question to ask before buying a house, as it can reveal a lot about the property or the neighborhood. Some reasons are obvious: the seller needs more space for a growing family, has to relocate for a new job, or is downsizing for retirement.
Other reasons are less straightforward.
“Legally, the seller has to tell you if certain things are wrong with the property, and most things they don’t know about will show up during the inspection,” Steelman notes. “But it’s probably still a good idea to ask something like, ‘Do I have any reason to believe why the home inspection would have an issue?’”
5. How much have nearby homes sold for?
This question gives you a sense of how your house compares to the ones around it. If want the value of your home to increase, it’s probably better to buy the crummiest place in a nice neighborhood than the nicest place in a questionable neighborhood. So if yours is the most expensive home on the block, you may want to ask some questions about why.
To get a sense of what properties around yours are selling for, search Zillow, Redfin, or Realtor.com for recently sold homes. You can also ask your real estate agent.
6. How much do utilities usually cost?
Before buying a home, don’t forget to ask about heating, cooling, electric, and internet costs! (And water, sewer, trash, recycling, etc.) To make sure a house will truly fit into your monthly budget, it’s essential to understand what utilities cost in a typical month.
If utility costs seem high, consider getting a greener power supply or investing in EnergyStar-rated appliances when existing equipment gives out. Both can reduce your total energy use and save you money.