When buying a home, especially a new home, wondering about what's included in the purchase price? In this episode, we look at potential hidden costs, basement pricing and things home buyer's need to look for in the purchase price of a home.
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Hello and welcome to another edition of Homebuyers School. I'm Karl Yeh, this is Cory McDonald, Community Manager with Brookfield Residential. In this episode we're going to answer the question:
What's exactly included in the purchase price of a home?
That's a fantastic question.
A lot of the customers I'm talking to, that's the biggest thing they want to know:
Is there's a starting price, there's an advertised price, but what does it really come down to when everything that you want, including the home, is added up?
Every builder, every presentation center might be a little bit different depending on what they include as standard specifications:
- is the hardwood included?
- is your countertop upgrades?
- is that included as well?
- are legal fees included?
A lot of the times these are the questions that you want to be asking of what are the standard specifications and potentially what are the costs of some of the upgrades that you may want to add into the home.
Again, it just depends on builder to builder, presentation center to presentation center, everyone might be a little bit different.
When someone is looking at the purchase price of a home, what kind of things should they be looking at?
Absolutely, especially if you're going through a show home parade, a lot of the show homes look beautiful, they're really spruced up to sell a dream.
A lot of the time those show homes are selling a dream that they're significantly upgraded above and beyond of what the standard purchase price is.
Finding that out, sometimes doing a walkthrough with the sales associate or the community manager, to figure out, okay, what is included, what standard and what are some of the generic costs upgraded in each of those presentation centers, just to maybe give you a little bit more of an idea.
Can you give examples?
100%, the show home parades that we're presenting are typically upgraded with really nice counter tops.
We've done some, possibly some structural upgrades, like if we've upgraded to a special shower or if we've added a third bedroom option in the upstairs or upper floor laundry.
Some of those structural options may be an additional cost that aren't noted in that base purchase price.
Do some of the show homes actually have a, what you'll see in the show home is what you'll get?
A lot of them will. A lot of them you can find breakdowns in, typically the kitchens.
A lot of them will have what is upgraded in the home, so at least it'll give you an idea of what kind of dream is being presented or what upgrades are added now.
What are some additional costs that we may encounter for upgrades at closing?
Most upgrades aren't added at closing, usually that's done prior to.
Even things, like if you're upgrading appliances last minute or landscaping last minute those are typically done in advance of your closing appointment.
Things to keep note of that may be additional would be things like the legal fees, are those included with the purchase price?
Are there any disbursement fees, so again, lawyers may charge an additional cost to do the transfer of money from you as a buyer to the lawyer who's representing the company.
A lot of the times, property taxes are due at that time too, so your share of the annual property taxes could be due at that point as well.
Same thing with the Homeowners Association fees, if those have been paid for the year.
Those are little things that, again, talking with your community manager or sales associate, would give you a better idea of what to expect at the closing appointment too.
Okay, well there's actually, I was doing a little bit of research and I actually kind of was looking at a couple other things that I think, additional costs that could add up when you're buying your first home, so for example, like you said, property evaluation fee.
There's a home inspection fee too, right?
Typically, again, if it's a newer build, then a lot of the city inspections, they would take care of a lot of that, or, again, if the lender that you're using specifically requires an inspection, then that might be additional as well.
That might be something to defer to your lender specifically depending on who you're using. With resale, for sure.
You want to make sure that you're not buying a complete lemon, so a lot of the times, to make sure that everything is fully functional, they will have that additional cost included in those closing fees.
There's other things like title insurance, insurance costs for high ratio mortgages, interest adjustments, those kind of things as well?
For sure, and again I'm not going to claim to be a specialist, these are definitely conversations to have with your lender, whether it's your mortgage specialist at the bank or your mortgage broker, just because each lender is going to be a little bit different, a lot of that mortgage insurance depends on how much of a down payment you're going to putting down as well.
Some of those things can be included, but it really depends on the lender, so it's maybe deferred to your lending specialist for those.
Is there any hidden costs when you're purchasing a new house? Anything that we might not see that can come up that we don't know about?
The biggest ones would be at closing because typically you can be upfront of what the Homeowners Association fees are for the year, if it's a condo or a townhouse.
If there's condo fees associated on a month to month basis to take care of your landscaping or your maintenance on the exterior as well.
But there are those things such as you will need to get homeowner's insurance to make sure that everything is secured financially in your home if anything negative happens.
If you do have to pay your property taxes, that would be due at the time of closing, or even in the case of a new build, after you move in, there's sometimes reassessments that the city does typically when you're at your closing appointment.
If you are paying for your portion of the taxes for the year, it's based on bare land. Basically, you're paying for the land, you're not paying for the house.
Then the city would come back and do a reassessment because now there's a house on that land, and so later on in the year, usually September, you get a letter in the mail saying that now they've done a reassessment for the land plus the building and that's, depending on the size of the home, that could be a significant chunk of money that's due upfront.
Being aware of these costs going into your closing appointment will definitely make it a more enjoyable closing experience instead of being surprised by maybe some of these additional costs.
Okay, no, to me that's really important because I had no clue that there would be an assessment on the lot itself rather than just the house.
Now, are both on the lot and the house?
They would be joint, yeah.
This comes into a difference between bare land or a condo or bare land redistribution.
There's a couple of technical, somewhat boring differences between them, but if you own the land versus if the condo board would take care of the land itself, but yeah, it's a reassessment on the land plus the house as well.
Does the price of a house actually include the basement too?
It would include the basement. Now, it depends on, does that mean basement development or just the square footage in the basement?
I was thinking square footage of the basement, so if the house did come with a basement, but if you had to develop it, it's an additional cost.
You would pay additionally if you wanted to develop a basement. There is a big difference between what's marketed in the square footage of the home versus what you actually move into.
Basically, the grading of the home is what's above dirt.
Basements are below dirt, so even if it is a developed basement, that square footage can't be included in, if you're putting it on MLS or if you go into a, if you see a brochure from a builder, that square footage can't be calculated.
Again, it is included in the purchase, it's just not advertised in the marketing square footage. That is maybe where some of that confusion comes in.
Are you saying, so if I was buying a house that's 1500 square feet and the basement was an additional 200 square feet, it would only say 1500 square feet?
100%, even though the total square footage of the house would be 1700.
Hey, thanks very much. That was actually really informative about the basement because I had no clue about the upper and the lower there. Anyway, that's it for today.
Thank you very much and we'll catch you next time.
Let us know if you have additional homebuying questions that we can answer by submitting them in the comments section below.
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About Cory McDonald:
Cory McDonald has been working for Brookfield Residential for over 5 years and has had the opportunity to sell in several beautiful communities around Calgary and Cochrane. He has experience selling everything from starter town-homes to move-up homes within the company. Cory originally grew up in Calgary and after a short stint living in the greater Vancouver area, he returned home for a better quality of life to raise his family.