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Out of Pocket Expenses

Out of Pocket Expenses when purchasing a home

Here are the out of pocket expenses a buyer should expect when purchasing a home.  These expenses are paid prior to the loan closing.  This means there is a chance the buyer could potentially be risking these expenses when making offers on homes.  

  • Earnest Money Deposit $500 – $1,000
  • Appraisal $500 – $600
  • Home Inspection $150 – $250
  • Pest Inspection  $95 – $110
  • Well and Septic Test $300 – $400

Earnest Money Deposit

The EMD is a deposit that is given to the title company when the seller accepts the buyers offer.  The deposit is a good faith deposit from the buyer that says that the buyer is serious about buying the house and is willing to forfeit their deposit if they were to change their mind after the contingency period of the escrow.  

The buyer does have the right to ask for a 17 – 30 day (sometimes longer) contingency period.  With the contingency period, the buyer has that time to inspect the property before deciding if they want to execute the right to purchase the home.  If for any reason the buyer decides after inspecting the home that they no longer wish to purchase the house they buyer may choose to exit the contact and get his or her earnest money back. 

Its important to have an experienced realtor that knows how to effectively negotiate for the buyer so that the buyer has little risk of losing their deposit.


The lender normally orders the appraisal as soon as the seller accepts the purchase offer.  The appraiser will want to get paid prior to going out to the property.  The appraisal will normally cost about $500.  Sometimes the appraisal can be more because of the location of the the property or the complexity of the property.  For example a multi unit will be more expensive than a single family residence.  

Required by lender
Ordered by lender

Home Inspection

I always will recommend getting a home inspection completed prior to closing on your new home.   This will be the first inspection to order.  The reason its the first inspection is because if you find something that you do not like and decide not to purchase the home you have only spend $250.  If you ordered the appraisal then the home inspection you would be out the appraisal and also the inspection money if you decided not to purchase the home.  

Not required by lender
Ordered by borrower or realtor

Pest Inspection

The pest inspection is only $95 – $110.  Most of the time this inspection is completed by the seller.   If the seller does not have a pest inspection on file we recommend the buyer always get a pest inspection.  There are some loans that require the seller to pay for the pest inspection and also any pest work to be completed.  

The VA loan is the only loan that requires a clear Section 1 pest report.   The VA requires the seller to pay for the pest inspection and requires the seller to pay for the pest inspection.  However the buyer can increase the purchase price for the seller to then pay for any pest work to be completed.

Well Inspection

The well inspection is going to be about $300 – $400.  This can be negotiated for the seller to pay.  The well inspection is required by the lender.  The lender will want to insure that there is sufficient source of water to the home and that the water is not contaminated.  

‘Required by the lender
Ordered by the realtor or the buyer

Septic Inspection

The septic inspection is not going to be a requirement from the lender unless the appraiser mentions something in his report.  The septic inspection will run about $300-$400.  This inspection is also negotiable for the seller to pay as well. 

Not required by the lender (Unless in the Appraisal Report)
Ordered by the realtor or the buyer