4 Hidden Costs in Real Estate

Unless money isn’t an issue and you can write big checks or pay with cash, buying real estate is not exactly the most straightforward process you will ever come across. Our article ‘4 Things You Need to Buy a House in 2018’ simplified the process a bit, especially for first-time home-buyers, as it outlined the things everyone must take into account before buying a house this year. This article will take a look at something that often catches property buyers off-guard, and that’s the many hidden costs.

Closing Costs

When you prepare your property-buying budget, it is best that you take into account all the expenses that can bump up the final price of the property you plan on buying. A Business Insider infographic lists nine of these expenses, with one of them being closing costs, which are expenses that buyers and sellers incur to complete a real estate transaction. Closing costs vary from state to state and may include loan origination fees, title insurance, appraisal fees, surveys, credit report charges, and deed-recording fees. In all, expect closing costs to make up 2.5% of the total home cost. That means additional expenses of $25,000 for a property worth $1 million.

Property Tax

If the seller hasn’t already paid property taxes for the time period when you will be the property’s new owner, then expect to pay these taxes immediately. Like closing costs, property taxes vary from state to state as well, with the highest rates being in New Jersey, (2.4%), Illinois (2.32%), New Hampshire (2.19%), and Connecticut (2.02%). A property investment feature titled ‘Fees You Need To Know About Before Buying a Home’ on The Balance warns that there may be other taxes involved, and these include municipal taxes and/or sewer- and water-related fees.


Buying property means additional expenses in the way of mortgage recording tax, which is in effect in eight states: Alabama, Florida, Kansas, New York, Minnesota, Oklahoma, Tennessee, Virginia, and Washington, D.C.

James McGrath’s CEMA article on Yoreevo explains that CEMA, which stands for Consolidation, Extension, and Modification Agreement, is “an agreement between two lenders regarding an existing mortgage” that allows the buyer to take over the seller’s existing mortgage. By doing this, it means the buyer will no longer have to pay the mortgage recording tax that is levied when properties bought via mortgages are listed in public records. This is a big deal because this tax can be as much as 2% of the total price of the property. A $1 million apartment, therefore, will mean an extra fee of $20,000 for the mortgage recording tax. The CEMA, however, is available only in New York. But the good news is that there are similar workarounds, the most popular being mortgage refinancing, which is very much like CEMA.


Sorting out paperwork is a necessary evil when buying property, and you will have to do so with a notary. This, obviously, comes at a cost: the notary fee. According to a Medium article the mortgage lender may pay for a portion of the notary fee. In most cases, however, it is the buyer who chooses the lawyer who notarizes all pertinent paperwork, including the final act of sale. By default, it is the buyer who must pay the lawyer, too. The costs of a notary range between $750 and $1,500, though it can actually go higher depending on the circumstances of the transaction. Simply, more paperwork equals more notary fees.

Make sure you take into account all the expenses that can bump up the final price of the property you plan on buying. And in that regard, use this article as a forewarning that there is more to consider than just the seller’s asking price. Otherwise, you might just end up falling short with your budget.


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About The Author

Edwin is the money hacking millennial behind Cash The Checks. He lives a minimalist lifestyle and is always eager to learn and share his methods to save and make money.

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