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Budgeting for Home Expenses: Expect the Unexpected

flickr.piggybankhouse.imagesofmoneyAmericans are buying houses again. Home prices throughout the United States are expected to increase an average of 13 percent in 2013 and 2014, according to National Association of Realtors’ Chief Economist Lawrence Yun.

If you’re about to purchase your first house, you’ve hopefully saved for a down payment and considered a budget for your monthly mortgage payment, real estate taxes, and insurance. But budgeting for home expenses doesn’t stop there.

Homeownership begins decades of expenses that most of us don’t consider before the closing. There are movers to pay, furniture to buy, and endless trips to Home Depot. And that doesn’t account for the surprises that homes — even new ones — love to cough up. Here are some of the expenses to consider as you ponder home ownership.

Immediate expenses 

If you have plenty of friends and a truck, then you’re in luck when it comes to moving. But if you’re like many of us who don’t have a truck or aren’t in the condition to move furniture, you may need to hire help. Even though moving companies can be extremely expensive, it’s important to look into who you hire and hire someone that you can trust. Many new homeowners have had their valuables stolen by strangers whom they hired from Craigslist to help them move. You should budget anywhere between $500 to $5,000 for moving expenses depending on how much you have to move and how far you are going. Moving Guru has a helpful cost estimator.

Another immediate expense to consider is whether you need to buy new furniture. Years ago I went from a one-bedroom apartment to a 4-bedroom house with my husband, and we decided that my grandma’s old loveseat wasn’t enough anymore. Plan a little time to comparison shop at several furniture stores and keep in mind that they usually have sales around holidays.

Unless you’re buying a property that has been fixed and flipped or recently remodeled, it’s likely that you’ll want to make at least a few minor updates such as painting, adding in dual pane windows or putting up shelves in the garage. Just make sure you’re careful about the contractor that you hire.

Finally, don’t forget tools you may need for routine home maintenance. Many apartment-dwellers-turned-homeowners forget to budget for things like a lawnmower, garden tools, power drills, and other tools required to keep your house running.

Supplemental tax bill

Hopefully when you were handed a huge pile of disclosures during the escrow process you actually took the time to read them. In case you didn’t, here is one of the many surprises you could be facing: After you close escrow you may receive an additional tax bill in the mail, depending on where you live and the assessed value of the property you purchased.

A supplemental tax bill is a bill for the taxes on the increase in the property’s assessed value, and it is prorated from the time you purchased the property until the end of the tax year. The California Land Title Association explains, “You will be required to pay a supplemental property tax which will become a lien against your property as of the date of ownership change or the date of completion of new construction.” In this market, many buyers are tapped out financially by the time they pay for a down payment and closing costs. A supplemental tax bill is just one of the reasons it’s essential to save up extra money or have a rainy day fund.

Unexpected home repairs

Saving an emergency fund to protect you from surprise expenses or lost income is personal finance 101, but it becomes even more critical for a homeowner. When you rent, the majority of unforeseen problems such as water damage, clogged drains, or broken appliances are covered by the landlord. When it’s your home, it’s all on you. And sometimes, those repairs are urgent.

Most rainy day funds should have between three and six months worth of living expenses and can be used to cover home emergencies like a heating repair, busted pipe, or leaking roof. We recommend starting another account to save for more routine home maintenance like painting and roofing (see the section below on maintenance schedules).

Home warranties

Many buyers have never even heard of a home warranty. Buyers can purchase (or can ask the sellers to purchase for the buyer) a home warranty from companies such as First American, Fidelity, Old Republic and many others. They usually cost around $350 to $500 for a year and cover items such as appliances, electrical issues, air conditioning and heating. Extended policies cover additional items like pool equipment.

When something breaks down or stops working you simply call your home warranty company. They send out a local contractor to bid out the cost of the repair and then have the work done. You typically pay a minimal fee per service such as $50 to $100. Not every type of repair will fall under the home warranty, but the company will give you a pamphlet explaining what is and what isn’t covered.

You may be thinking, “I just put the majority of my savings into this home, so I really don’t want to fork over another $400 for a home warranty that I may not even need to use.” A home warranty is like insurance. Hopefully you won’t have to use it but if you do, you’ll be glad you had the policy. Certain things like appliance repairs, pool equipment, heating and air problems can be very costly to fix and if you don’t have enough money in your savings when things come up, you could be in a major bind. Bloomberg reports that major expenses may put [first time homebuyers] at risk of defaulting on their loan.

Home warranties arent’ for everybody. If you have the savings to cover emergency repairs, you’ll likely save money in the long run going without  But if you drained most of your cash to buy your home, you might consider a home warranty for a year or two until you can replenish your rainy day savings.

Maintenance schedules

New homeowners are often overwhelmed by the idea of continual maintenance on the exterior and interior of their properties. If you live in a condo or townhouse, most of the exterior maintenance such as common areas, cleanliness and gardening are usually covered by the homeowners’ association. But if you live in a single-family home, you are the one who’s responsible. It’s a good idea to create a monthly schedule for maintaining things like cutting tree branches, gardening, cleaning the chimney, changing air filters, testing smoke alarms and more. Family Education has an excellent spring, summer, fall and winter home maintenance sample schedule.

Depending on what part of the county you live in, you may want to hire a company to do monthly or quarterly treatments for termite or rodent control.

Home ownership may not be as easy as you expected it to be, but it can be once you get in the routine of things such as saving up money with each paycheck and putting in the extra effort to care for your house. We recommend creating a separate savings account to budget for home expenses. Set up an automatic transfer to the account at the same time you pay your mortgage. How much to save depends on the age of your home and anticipated maintenance but saving between 10  and 20 percent of your mortgage payment each month is a good place to start.

Budgeting for home expenses is an unpleasant but necessary part of owning real estate. How do you do it? 

Published or updated on June 10, 2013

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website RealtorSD.com.


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  1. AG says:

    To try and keep some items within a tighter budget learn to do things yourself. I find talking to people at some of the local hardware stores or big box ‘home’ stores can be very useful along with looking up ‘how to’ videos. Remember to always be safe and use the proper tools!

  2. Drake says:

    Any repair or maintenance related to central AC is a few hundred dollars MINIMUM, fixing a freon leak for example is over 1k easy. A home warranty that covers central AC repairs has already paid for itself.

    Luckily I didn’t run into anything exorbitant so far in the 3 years I’ve been in my home. I’ve had 3 repairs that were only a couple of hundred dollars each and also used my 1 year home warranty about other 3 times before it expired.

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