I am overdue for an update on my house purchase and house sale journey. In my defense, it’s been a slow process. But today, I’ve been thinking about all the costs of home ownership that get overlooked. Especially as they are staring me straight in the eye, from my banking app.
First, we started sleeping in the new house in early April. I say ‘ started sleeping’ because, in certain ways, it still feels like we have one foot in each property. The main challenge in the new house has been moving the laundry from the basement to the second floor with the bedrooms. Our plumbers did a great job running the water, gas, and vents to an old cedar closet in the hallway. We are still waiting on an electrician to run the proper plug, and then we can order a new stackable washer and dryer. So, for the time being, we are doing laundry at the old house, a huge pain. Fingers crossed, everything should be up and running next week.
After a month in the new house, I can confirm, we absolutely made the right decision. We are so comfortable in the new home. Everyone has their own space, and the huge backyard (by city standards) feels so peaceful in the mornings and evenings. My favorite room is the tiny breakfast room off the kitchen. It has doors opening to the backyard, and two of those old swinging doors; one to the kitchen, and the other into the dining room that is open to the living room at the front of the house. The kids eat breakfast and dinner in there, and sometimes we join them, if we can finish everyone’s separate dining orders in time. My only minor complaint about the house is that there are no bookshelves. How can a house built in 1940 not have bookshelves? My books are stored in the garage for now. I picked a place for the bookshelves, so I’ve already got another project on my hands, for later.
Repairs at the old house as moving along slowly. We hope to have it on the market in a few weeks, just in time for hurricane season! I am nervous about being on the selling side of the transaction, but I am trying to keep a level head and be prepared for it to take longer than expected to sell. Prepare for the worst, and be pleasantly surprised by any better outcome. That’s a motto I’ve used in investing, and I think it has served me well.
Now, here are the costs that are often overlooked when buying a house. These costs are the reason it makes sense to have a long time horizon when considering a home purchase.
Inspections. A home is the biggest purchase that most people will make in their lifetime. It is prudent to pay a home inspector to examine the structures and systems in the house before finalizing the sale. In New Orleans, with its old housing stock, the inspection can make or break a real estate contract. For the new house, we hired a general home inspector, a sewer inspector, a terminate inspector, and a roof inspector. The all-in cost was about $1,600. Most of the information we received was good news and very reassuring. But we requested quotes for a few repairs we felt needed to be made and used those to negotiate with the sellers on some concessions before the closing. This was money well spent.
Closing costs. Everyone focuses on the down payment, which can range from 3.5 – 20% for most homes purchased with a mortgage. And while the down payment is the largest percentage of your closing costs, there are some other big-ticket items due at closing. We had to reimburse the sellers for the remaining months of pre-paid taxes they paid on the property in January, basically a full year of property tax. We also paid for a full year of homeowner’s insurance coverage, which was much higher than I budgeted. The homeowner’s insurance market in Louisiana is a disaster after several bad storm seasons. No one wanted to insure our old slate roof, so we ended up with the state-run insurer of last resort that charges more than a private policy. We had no choice. Then there are a variety of fees related to taking title of the home, including the much-maligned title insurance. The lender required an appraisal, a credit report, a flood certification, and a tax service fee. There was also a fee to record and mortgage and title with the local Clerk of Court. We also paid three months of estimated homeowner’s insurance and property tax to fund our escrow account, which the bank required. All closing costs are relative to the purchase price of the house and the local costs in your area. For us, closing costs ex-down payment were 2.52% of the price of the house.
Moving costs. We rented a truck and paid some friends to help carry heavy furniture. So what you might consider to be our moving costs, were fairly low. However, there is much more to moving than simply relocating your stuff. We upgraded from two bathrooms to four. This required two sets of everything you need to make a bathroom functional, from toilet brushes, to bathmats, to mirrors and towel racks. Our new storage closet under the stairwell needed new shelves. In a bigger house, one WiFi router wouldn’t suffice, so we have two more to extend the coverage. This is a problem we are still working to resolve. I already mentioned the plumbing and electricity for the laundry room relocation. Different appliances and surfaces require new cleaning supplies. This list could go on. And then there’s a ridiculously large television that appeared in my living room while I was traveling for work last week. Apparently, the old one was too small for the space. Longer term, we will build a storage shed for my husband’s tools in the backyard and those bookshelves I mentioned earlier. These one-time costs can add up fast.
Fancy Neighborhood Tax. Our new street has a lovely neighborhood association. Everyone knows everyone’s name and looks out for each other. We have a private patrol car at night that we can call to escort us home if arriving late. I believe this is a cost built into our property taxes, but I haven’t confirmed. A few weeks after we closed on the house, we got a nice letter from a woman who has organized to spray all of the live oaks on the street for buck moth caterpillars, a huge and painful nuisance if you step on them with bare feet. The cost is $75 per tree on your property. I have no idea what other fancy neighborhood costs will surprise me this year, but I think the benefits will outweigh them.
In a way, moving to the new house has been like pulling a Community Chest or Chance card in the game Monopoly. I’ve had to be willing to roll with surprises and pull up my sleeves for the hard work. Despite all of these challenges, I feel great about the decision. This family home is worth the big trips we won’t take this year and worth the other budget-crunching we’ve had to do to make it happen. I will be able to relax once our old house sells, but I know that realistically, that is months away. Until then, I’ll keep bringing my lunch to work.
