Just like owning anything, owning a home comes with some hidden costs. After a buyer has cleared the hurdles of down payments, closing costs and mortgage payments, there are other costs to consider.
Unfortunately, agents always come across clients who haven’t factored in all of the “hidden” costs, which are the true cost of homeownership. These can include property taxes, repairs and other items that aren’t obvious.
Before buying, clients should be in position to handle all of the costs of homeownership.
Financial adviser Jenna Rogers with Mission Wealth Management told Realtor.com that she often advises first-time home buyers to make a list of all the expenses that are expected for at least the first year.
“Open a new savings account, and designate it as the ‘home account,'” Rogers explained. “Send the necessary amount to this home account every month. That way, when you have to pay property taxes, for example, you’ve already had the cash build up.”
The Top 10 markets where the costs of homeownership are the highest include, from 10 to 1, Houston; Honolulu; Los Angeles; New Orleans; Miami; New Haven, Conn.; Cape Cora, Fla.; Boston; Bridgeport, Conn.; and New York.
Property taxes are a high cost associated with homeownership. They can seem high. In fact, there are cities where the rates are higher than those areas in our Top 10, however, other costs are lower in those areas.
New York, which tops the list, has a 2 percent property tax rate. That is, the taxes total 2 percent of a home’s value in the Big Apple. The national average is about $2,100.
Property taxes are set and collected by state, county, or municipal agencies. A number of entities can have a tax levy on the same parcel and they are connected to home values and fund police, fire and schools.
Home insurance is another cost that isn’t immediately obvious, and it can add up. The national average is $102 monthly. It can be pricier in places like Miami and Cape Coral, where risks are higher.
Maintenance and remodeling can be costs that many homeowners fail to consider and can add up quickly. Leaks can develop. Furnaces can quit. All mean added expenses that often aren’t expected.
Maintenance not only is important for maintaining a home’s value. It can be key to increasing its value. In markets prone to hurricanes and other forces of nature, the cost of home maintenance can be even higher.
Moreover, roof and foundation issues can snowball into a larger problem and cost a lot of money to correct.
When it comes to renovations, the work goes beyond a coat of paint and new curtains. A standard kitchen remodel costs an average of $21,600 nationally. Painting the rooms of a home can cost $1,700, according to HomeAdvisor’s True Cost Guide.
When you factor in higher labor and material costs in some markets, like Los Angeles, the average kitchen renovation can cost more than $31,000.
As people live in a home, the bills for electricity, cable, water and trash will soon begin to fill the mail box. They can offer a surprise to homeowners who have been renting.
Attom Data Solutions and UtilityScore recently released a white paper that analyzes the impact of utility costs on overall housing costs, home affordability and home seller profits. The survey found that utilities add 25 percent to homeownership costs.
“Utility costs are a significant, quantifiable factor contributing to the overall costs and risks involved with owning or renting a home,” said Daren Blomquist, senior vice president at Attom Data Solutions. “On the other hand, reducing utility costs — specifically energy costs through the installation of solar — can amplify the wealth-building potential of homeownership.”
Monthly utility costs require 7 percent of average wages on average across 931 U.S. counties analyzed for the white paper. When utility costs are included, buying a median-priced home requires more than the 43 percent of income recommended by the Consumer Financial Protection Bureau (CFBP) in 323 of the 931 counties (35 percent). That’s 122 more counties exceeding the CFPB affordability threshold than when utility costs are not included.
In Florida, homeowners may not have heating bills, but summer electricity bills can top $200 a month.
Domestic help also costs an average of $12.50 an hour nationwide. Hiring a housekeeper for three hours a month can add up to about $450 a year.
If homeowners have a problem with ants or, worse, termites, that will be another additional cost. Mice and bedbugs also can wreak havoc. The average cost of handling these issues, according to HomeAdvisor, can average $178.
There are other costs, such as lawn work, that also can be included, depending upon your tastes.
Ultimately, homeowners have to be prepared for all of the costs. Agents can be ready to answer all of these questions to provide an added level of service for clients.