Thursday, 30 August 2012

9 Costly ‘Extras’ to prepare for as Homeowners

9 Costly ‘Extras’ to prepare for as Homeowners
Buying a home is very exciting time.  There is so much to think about with the buying process that people often overlook some of the extra costs that will pounce on you as a new homeowner.  I found this article on an amazing website called but have edited it to fit our Real Estate market in The Bahamas.
When people have a budget in mind for their house they typically factor in the cost of the home, the taxes and fees required for the transaction and then focus on the monthly mortgage payment amount. 
As a potential new homeowner, it is important to factor in the following extra costs so the excitement and joy of becoming a homeowner and fulfilling a dream does not quickly fade and become a nightmare! So, if you’re planning to buy a new home, have just signed the paperwork, or are moving in next week, this list is for you. And if you know someone who's moving in, share this with them.

1. Window Coverings, Treatments, Hurricane Shutters & Security Screens

“Oh, look at all the windows! It’s so bright, so spacious, the views are lovely!” Well, yes they are. But you don’t want people viewing you at night, or looking in whenever they want, so all those windows need coverings. If it’s a new home, you’re going to be spending hundreds (and probably thousands) of dollars on blinds, curtains, curtain rods, tie backs, valances, and shades (even more if you're not too handy and have to have someone come and fit them for you). If it’s an old home, you may be fine for a year or two with what is there, but you’ll need to decide if you want to live with the old owner’s treatments or have your own.  You also need to factor in hurricane shutters and in some locations security screens for added protection if the home you are buying is not already equipped. 

2. Landscaping and Grounds keeping  

Walking around new neighborhoods, you see all sorts of beautiful landscapes. And there, almost always, you’re on your own. Depending on the size of the yard and the HOA rules and restrictions, you could be looking at $10,000 - $30,000 worth of landscaping materials and labor. Want a deck or a patio? That’s even more money. And then you may need sprinklers, irrigation, and other services. If you move into an old home, that’s no guarantee of a great yard.  So, do your homework. See if you can hustle the homebuilder for a finished back yard too, or ask the seller to drop the price to cover landscaping.  Or be prepared to live with it as is until the additional funds come along.

3. Major Appliances

New home builds will sometimes include utilities, but not always. If you buy an existing home, you may not have any appliances included, or they may be old.  So figure on spending a nice chunk of change when the time comes to move in or upgrade.

4. HOA Fees

In Nassau, gated communities are first on everyone’s wish list.  However, Condos and Homes in gated communities come with a Home Owners Association. In theory, they’re a sound idea. They are their to keep the community looking great, and deal with trash collection, playgrounds, community pools, street lighting, common areas, security, and so on. Of course, in practice many people hate the HOA because they extend their reach far beyond what most people consider fair. They can tell you what colors you can and can’t paint your house, what type of blinds and window treatments are allowed, what you can and can’t put in your yard, and the list goes on.  Some are just a few hundred a year, while in the higher-end neighborhoods, you may not see much change out of $1,000 every month! Did you see that one coming? Before you buy, make sure you know what the HOA dues are, but remember, they can go up annually and you have little say in the matter.  Be sure to allow for this in your monthly budget.

5. Furniture

Of course tastes can range from Ikea to custom-built furniture, but what you need to know is that most homeowners completely underestimate the amount of furniture they’ll need. This is especially true when upgrading from your starter home into a bigger home. You may now have two areas for relaxing, a living room and family room. You could also have a den, a library, a nook or study, extra bedrooms, guest rooms, outdoor dining/living areas or even a game room. Depending on what you’re moving into, you could have a very empty-looking house that needs to be filled. Get ready to go shopping.  Or get creative, talk to people who are updating their house, try consignment shops and garage sales.

6. Insurance

There are a few different types of insurance you need to have when buying a home. First, you must have homeowners insurance. If you have a mortgage in The Bahamas you are required to have catastrophe which covers hurricanes. If you live in a duplex or other type of connected building, the insurance may be covered in your HOA dues, but you should also have contents insurance, based on the value of your possessions. Banks also require life insurance policies, which is not substantial but still an extra monthly expense.

7. Property Tax

Property Taxes in Nassau vary depending on the price bracket of your home and occupancy status and it is still another expense to add to the long list of ‘extras’. The good news for first time home buyers is that you have your first 5 years exempt, but take it from me, those first 5 years fly by!  After that the breakdown owner occupied property is: For the first $250,000 of market value is tax exempt, more than $250,000 and not exceeding $5,000,000 of market value is ¾%, more than $500,000 and not exceeding $5,000,000 of market value is 1%. 

8. Utilities

This can be quite a shock, especially the electricity bills in Nassau. And what’s worse, depending on when you move in, you could really get a wake-up call. You will want/need your air-conditioning more in the summer months, so you may budget based on the winter bills, only to be unprepared for summer.  Ask neighbors have they have been paying or be sure to ask the previous home owners during the negotiation process. 

9. Repairs and Maintenance – Who Knows!

One of the biggest unknown expenses of owning a home is the repairs and maintenance costs that can hit you out of nowhere. If you were formerly renting, that was all taken care of. Now it’s all on you. If the water heater breaks, you pay. If the roof leaks, you pay. If you need a new well, you pay. If there are plumbing issues, you pay. And these bills can be steep. You’ll soon find out that hourly labor costs for plumbers, electricians, and builders are usually a lot more than the hourly wage you get paid.  It is important to have a reserve fund for emergency household expenses, and factor that in as a monthly ‘expense’ to put away money into a household repairs fund so when the fridge breaks you have the money to repair/replace it.   

As a licensed sales agent and appraisal associate, I would be more than happy to help you through your home purchasing experience and aim to make it as smooth as possible!

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