Costs tied to making an offer on a home

Making an offer on a home is an exciting part of the homebuying process. It means you’ve found a home perfect for your future. However, be sure to budget for a few additional costs you’ll likely need to pay before you close.

If a seller accepts your offer, you’ll likely need to provide an earnest money deposit after entering into a purchase agreement with the seller. The earnest money is the deposit you make that represents your serious intent to buy the home and is generally 1% - 2% of the home’s sale price. This money is either paid to an escrow account or deposited to a third party, such as a title company or real estate broker. But what happens to this money during the progression of the buying process? 

If the home sale is finalized, the earnest money can typically be applied to your closing costs or the down payment. However, if you choose not to purchase the home for a permissible reason, such as a failed home inspection or other contingency outlined in the contract, you may still be able to get this money back. 

However, if you decide not to purchase the home for a reason that’s not covered in the contract, you may have to forfeit the earnest money deposit entirely.

As soon as your offer is accepted, the purchase agreement between you and the seller will oftentimes be contingent on a home inspection. A home inspection reveals valuable information about your home’s condition and can help you spot issues that need to be fixed. 

How much you’ll pay for a home inspection will depend on the inspector or inspection company, as well as the type of inspection(s) performed, so be sure to do your research beforehand.

Based on the inspector’s report, you can decide to negotiate repairs into the contract with the home seller (meaning the seller agrees to make repairs or reduces the sale price to compensate), to make the repairs yourself, or to back out of the purchase of the home altogether if there are serious problems with the home.

Note: not all general inspectors cover every aspect of the home. You may want to consult additional inspectors for the home’s electricity, plumbing, fireplace, etc. if needed. 

Generally required and ordered by the lender, the appraisal confirms the house is worth the amount you want to borrow. In other words, it determines the property’s fair market value. 

The cost of the appraisal is typically included in the Loan Estimate documents presented by the lender and is calculated into the final closing costs.