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I am looking at my options of buying a house out of college. I am comparing the cost of buying a cheaper house now and then in about 5 years moving up to a house that will be able to support a family better versus just buying the nicer house now.

I have determined that I can budget the full amount of a 15 year mortgage on the nicer house, but am considering going with a cheaper house and putting the difference of monthly payments into savings. Then use that savings toward buying the nicer house later.

The factor that I am having a hard time adding in is the cost of buying a house, by this I mean all of the fees (title, closing, mortgage, realtor, etc). What should range should I expect for these and will they be different on buying versus selling?

Note: This is in the United States.

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    Also, if there is anything I should consider in my decision please let me know.
    – Kellenjb
    Commented May 16, 2011 at 16:21
  • Don't forget property taxes and insurances. While not a "fee", they do impact the cost of buying significantly
    – bitsoflogic
    Commented May 20, 2011 at 15:44

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Typical costs to buy might include:

  • 1000 or so in financing costs (including title fees etc.)
  • couple hundred for inspection
  • any moving costs
  • probably some repairs and new furniture after moving in

One piece of advice if you've never bought, fixing problems with a house always seems to cost more than the discount in price due to the problems. Say the house needs a 15K new kitchen it seems like it will be just 7K cheaper than a house with a good kitchen, that kind of thing. Careful with the fixer uppers.

Costs to sell include:

  • 3% to seller's agent and 3% to buyer's agent
  • any repairs and landscaping you were putting off
  • potentially staging or professional cleaning
  • any repairs the buyer demands after inspection, that you agree to
  • and of course you have the buying costs again for the replacement house

Doing your own cleaning, repairs, moving, etc. can save a lot.

You can also choose to work without an agent but I don't know how wise it is, especially for a first time buyer. In my town there are some agents that are buyers only, never seller's agents, which helps keep them unconflicted.

Agent commissions may be lower in some areas or negotiable anywhere.

Real estate transfer taxes may be owed by buyer or seller depending on location: http://en.wikipedia.org/wiki/Real_estate_transfer_tax

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    This is a good list. I would add real estate transfer taxes, which vary greatly by location and the value of the property. This can be multiple thousands of dollars. Any agent should be able to give you the local rates. Based on my recent re-fi in Virginia, it was about $2.50 per thousand.
    – KeithB
    Commented May 16, 2011 at 17:50
  • I have never been in an HOA, but would those costs be there too?
    – MrChrister
    Commented May 16, 2011 at 18:41
  • Usually the buy and sell agent costs are paid by the seller.
    – Brian Carlton
    Commented May 16, 2011 at 18:51
  • In a buyers market (2011) wouldn't the seller usually pay 6% and buyer pay 0% for the agent?
    – Joe Phillips
    Commented May 16, 2011 at 18:51
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    I'm pretty sure my buyer's agent had a clause that I had to pay them if the seller didn't offer to, as a detail, so I don't know how meaningful it really is that the seller pays... in theory if you had no buyer's agent, the seller could give you a 3% discount, right? So in that case the buyer is forgoing the 3% and thus paying their own agent in effect... it seems kind of semantic. The main point is, the agents get 3% each, it's hard to tell if that means the buyer paid 6% extra or the seller got 6% less ... ;-) off-topic I guess.
    – Havoc P
    Commented May 16, 2011 at 19:59

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