The cost of closing
I've done a few jobs in my life but have spent the last twenty years working in the property industry across the commercial and residential segments; I currently work at management level for one of the countries largest property groups and there's been ups and downs but overall it's been rewarding and I can't complain too much having attained a good degree of success.
Real estate tends to be interesting to most; Unsurprising considering that most of us live in it, own it or want it and the industry is a driving force behind the economy: Building, design, retail, manufacture and so on.
Last week a friend contacted me with a link to a residential property she wanted some advice on; She's getting married in April and they have had a difficult time finding and securing the right home for themselves. I was happy to help.
This is not the house they are buying; This one is worth many millions.
I performed some research and gave them an idea on what I felt it was worth on the open market. The vendor was asking $575,000-$625,000AUD and my research showed a fair price would be $595,000-$610,000. Of course buyer-competition may force the price up, but I felt if they were paying in that range the house was worth it.
They decided to put an offer in, I coached them through the process of negotiation with the sales agent and they were fortunate enough to secure it with their final offer of $600,000. There were two other couples so I think they were lucky to get it for that price.
Once secured along comes the closing costs which, of course, I helped them with. These are costs associated with the title transfer and to cover the legal aspects, government charges and various other things; The property searches which are required for the preparation of the Form 1 Vendors Statement document which begins the 48 hours cooling off period legislated here in my State. The amount also includes Stamp Duty to the government; That's like a tax.
Closing costs on $600,000
I made the spreadsheet for them below, the purchase-closing-costs, just to outline what to expect. These figures are accurate give or take a few dollars and are based on a purchase price of $600,000 in my State of Australia.
That's a fair amount of closing cost right? My State pays the highest Stamp Duty in the country which accounts for most of the cost. Five percent of the purchase price is the figure usually thrown around and as you can see it's about right; A little over in this case.
I remember paying $89,500 for my first house in 1997, which I still own, now worth about $440,000, and looking at these figures, $633,000, makes me wonder how people can do it; Of course, that's just how it is and if one doesn't pay the money there's no house and so they find it...From the bank usually although my friend has a good $100,000 deposit to throw in.
Yesterday they payed the deposit which means they're locked in. There's a finance clause on the contract so if they don't secure the money the contract will fail, but that won't happen as they have secured pre-approval through a finance broker, which is smart. It's my broker as it turns out - They asked for help there too, months ago.
So, I'll be attending their wedding soon, and their moving in day later in June as I'll assume they'll ask for help which I will be happy to provide. It's a huge commitment for them and I wish them all the best...She freaked out a little, but when their mortgage settles on them they'll resume life, albeit with less expendable money from month to month.
So, how about you, what's your house-buying experiences been? Did you buy or do you rent, and what made you go down that track? Do you have property investments and if so how have they gone, and if not why not? Feel free to comment.
* Design and create your ideal life, don't live it by default - Tomorrow isn't promised so be humble and kind
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