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Get ready for yet another cost when buying a home: Junk fees
Confirmed
In Short: Homebuyers are facing a new cost when purchasing a home: junk fees. These fees, which have been around for decades but are now spreading to both buyers and sellers, are adding up to nearly $2 billion in annual expenses, according to research from the Consumer Policy Center.
Kelly MacDonald, a homebuyer in Cincinnati, paid a $425 junk fee, which, though small in comparison to the total home purchase price, is an immediate out-of-pocket expense that can be a significant burden for those barely able to cover their costs.
Consumers didn't really ask what it was for, or were told it was their cost,' said Kelly MacDonald, who was ready to move out of her small rental home and buy her own place. These fees, which come with various names like document storage fees and administrative fees, can be confusing and often go unchallenged by buyers.
Experts advise homebuyers to get preapproved by their lender before starting the house hunting process. This not only helps in moving quickly when making an offer but also provides insight into their home-buying power, making them appear more serious to sellers.
What's confirmed
- Kelly MacDonald, a homebuyer in Cincinnati, paid a $425 junk fee, which, though small in comparison to the total home purchase price, is an immediate out-of-pocket expense that can be a significant burden for those barely able to cover their costs.
- Consumers didn't really ask what it was for, or were told it was their cost,' said Kelly MacDonald, who was ready to move out of her small rental home and buy her own place. These fees, which come with various names like document storage fees and administrative fees, can be confusing and often go unchallenged by buyers.
- Experts advise homebuyers to get preapproved by their lender before starting the house hunting process. This not only helps in moving quickly when making an offer but also provides insight into their home-buying power, making them appear more serious to sellers.
What's still developing
- And while they have been around for decades, they are spreading, including now often being charged to both home buyers and sellers.
- Both are collectively paying nearly $2 billion in these fees a year, according to new research from the think tank Consumer Policy Center, which called that estimate conservative.
- Kelly MacDonald ended up buying a five bedroom home. Her new place has a fireplace, a big yard for the dog and is located on a quiet corner. She paid $445,000. "Had to work hard for it," she said while looking at her new front porch.
- She met a real estate agent at a backyard party earlier this year ready to help.
- And soon, commenters had a warning for her: This is a junk fee.
- It also makes you a more serious buyer in the eyes of sellers, since it means a lender has already reviewed your finances and issued preliminary approval for a home loan.
- You might start with a prequalification in the early planning stages of looking for a home.
- If you're planning to buy a home, securing a mortgage preapproval is an important first step.