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As a Cambridge real estate agent, the city squares of Cambridge, Somerville and Medford and the town centers of Arlington, Watertown and Belmont, Massachusetts are my home turf. And as a lifelong New Englander who’s lived within twenty miles of Boston most of my life, I can introduce you to other nearby towns as we search for your new home. If you’re planning to sell your home in Cambridge, MA or nearby you’ll find plenty of info about the home selling process here too. Questions? Send me an email or call me at 617-504-1737.

Unanticipated Expenses When Buying a House or Condo in Massachusetts

What sort of unanticipated expenses might you encounter when buying a house or condo in Massachusetts?

You’ve been saving for years, you’ve carefully budgeted the money you need to  buy a condo or your first house, you think you have a handle on the costs – and then an unanticipated expense hits you at the last minute. Ouch!  What are some of the miscellaneous costs of buying a house or condominium in Massachusetts?

Insurance for Home Buyers

insuranceInsurance– When you buy a house the bank will require proof – an insurance binder – that you’ve paid for a year’s homeowner’s insurance coverage.  Most likely the bank will set up your monthly mortgage payment to include money towards future insurance payments.  This money is held in escrow by the bank which typically collects money towards your property taxes as well. Even though you’ve just paid for a year’s coverage the bank will also collect several months worth of that monthly escrow amount.

Condominium associations are covered by master insurance.  As a condo unit owner you will be responsible for a portion of that coverage which is typically budgeted and paid for with your condo dues .  If you’re buying a new condo it is not uncommon for you to be required to reimburse the developer for insurance payments he has made in advance. For example, if the developer paid for a full year’s coverage you would be required to pay your unit’s portion of that bill. 

Master insurance for condos typically covers the building “from the studs out” and condo owners are encouraged to get an additional policy to cover the contents and finishes of their unit.  Until recently that coverage was not required as a condition of your mortgage but due to changes in lending guidelines, it is now a requirement to get a mortgage.  The coverage is called HO-6 insurance and lenders and others involved in the home buying process are just getting a handle on what’s required.  Lenders are requiring coverage equal to 20% of the appraised value of your condo and you would then get additional coverage for your possessions, etc.  Your attorney, lender and insurance company can provide guidance.

Title Insurance

Title Insurance is an unexpected expense that buyers often don’t find out about until quite late in the process since it is usually paid for at the closing.  As a buyer you assume all costs incurred by the bank making your loan.   You will pay for title insurance to protect the bank – that’s not optional.  Title insurance coverage to protect you is optional however. 

When I bought my first house I wasn’t spending any money that I absolutely didn’t have to and chose not to get title insurance.  In the years that followed, however, I repeatedly read real estate attorneys’  newspaper columns that advised homeowners “if you had title insurance you would be ok” in response to some question about a problem (or disaster!) they were having with their house.  I’ve made sure to purchase title insurance ever since.  Like much insurance it’s coverage you may never have to use but sure will want to have if some problem comes up – documents that were misfiled, problems with what’s deeded to you and what isn’t – the problems that title insurance covers are varied and unexpected and often come up years down the road when you’re trying to sell your home to move to a new place.  Title insurance will help to address those unexpected problems.

Contribution to Reserves

bringing-moneyIf you’re buying a new condominium in Massachusetts most condominium associations will require you to  contribute two months of condo fees to the condo association’s reserve account.  This means that the new condo association will have a balance in the bank to deal with any issues that come up.

Heating Oil

If the house or condo that you’re buying is heated by oil you’ll be required to reimburse the owner for the oil in the tank.  Shortly before the closing, the seller will get a statement from the oil company that gives the value of the oil in the tank.

Better to know what to expect so the unanticipated expenses when buying a house or condo in Massachusetts don’t trip you up at the last minute.

Categories: Buyer Info

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