what every family should know

Building a house may involve hidden costs. Unfortunately, many people don’t think about these costs until it’s too tardy.

Some buyers fall for marketers’ tricks to attract them, relying on upgrades and extras that inflate the price.

Other costs involve the risk of delays, changes in loan terms, unexpected taxes and fees, insurance, compliance with local development standards, and in some cases even exit fees.

So let’s take a look at the sales tactics buyers should avoid, as well as five hidden costs of building recent homes.

How marketers persuade us to build a house

Home building package sellers utilize a variety of strategies to attract buyers.

Attractive prices and promotions

Marketers often attract first-time homebuyers and juvenile families by advertising low prices and showcasing up-to-date designs.

They will then offer you an upgrade or value package. The most common examples we see include a $30,000 upgrade loan, a $45,000 cashback, or an incredibly budget-friendly house and land package.

Our research found that consumers are likely to be more surprised by higher levels of discounts for high-involvement products such as purchasing a home.

Marketers make it seem like you’re getting a great deal, with the ability to customize your home just the way you like. What they don’t always say is that advertised prices are usually for the most basic version of the house.

Any upgrades like granite countertops or hardwood floors cost more. Often, the basic price does not include such critical elements as curtains, ceiling fans or air conditioning.

These improvements quickly add up to more than $30,000 in upgrades or a $45,000 cash back offer. Buyers may end up paying much more than they planned.

Please remember that most home construction companies act as intermediaries who purchase and outsource products. They will likely add fees for most upgrades or devices ordered through them.

A $200 kitchen lamp purchased directly from a retailer like Beacon Lighting may cost $300 from the manufacturer. Such costs add up for the entire house.

What can you do? Take note of the code or item name and purchase it directly. Check if builders can install the hardware at a lower cost if you supply it.

Social media and influencers

Influencers can make the process look effortless and fun. Our research on influencer marketing and influential people and virtual influencers shows that trusting followers are more likely to follow influencers’ suggestions.

For example, an influencer might share a video of a “perfect day” in a recent home, focusing on the benefits without mentioning the hidden costs.

Special offers and limited-time offers, such as cash back, give shoppers the sense that they need to act quickly without taking the time to think about the financial commitment. This strategy uses fear of missing outor FOMO.

The goal is to get customers to sign up quickly with a $1,000-$5,000 deposit. This increases customer engagement and stops them from disengaging.

Please check the deposit terms carefully as you can most likely withdraw with a full refund if you are not satisfied with the final price before signing the final contract or during the cooling off period after signing the contract.

What are the 5 hidden costs?

1. Change in interest rates over 30 years

Many homebuyers think about interest rates when taking out a mortgage, but they often don’t take into account how rates can change over the years. Even a petite escalate could mean paying thousands more over the life of the loan.

When buying a home, people hope for lower interest rates, even though they cannot predict future economic conditions. The optimism attitude theory could explain why many of us have expectations of a future that will be more favorable to us.

What should temper this optimism is the fact that even seemingly petite changes in interest rates make a massive difference over time. For example, a $700,000 loan with a 30-year term at 3.5% interest has a monthly repayment of $3,143.31. At an interest rate of 4.5%, the repayment is $3,546.80. That’s an additional $4,841.88 per year.

Understanding this can aid families budget for possible changes and avoid financial stress later.

2. Costs of delay

Delays may result from weather, problems obtaining materials, or other unexpected issues. Since 2020, wood shortages have affected house construction.

The costs of delay may include having to rent an apartment while you wait for the house to be completed. Rent for three months, for example, with the national average being $600 a week it will cost over 7 thousand.

3. Unexpected costs

In addition to predictable costs such as deposit and tax or transfer fee (stamp).other smaller, unexpected costs may accumulate.

These include bank fees, attorney fees, building and pest inspections, moving costs, utility connections, and home and contents insurance.

All of this is necessary to keep your home safe and sound. But the cost can easily exceed $5,000.

4. Standardized costs

Many recent developments have rules about what owners can and cannot do with their property.

These rules may specify paint colors, fence types, or landscaping options such as planting a certain number of immense trees.

The development may require homeowners to utilize certain types of trees or materials to build driveways, which will cost an additional $2,000.

Most often, a developer will require a refundable deposit of approximately $1,000-5,000 when purchasing land for your home. The amount will only be refunded once the developer confirms that you have met all the conditions. If you don’t do this, you won’t get your money back.

Before you buy a condo, first find out how much you have to pay in strata fees and other fixed or ongoing costs.

5. Exit costs

In uncommon cases, real estate sales can attract exit fees. For example, if an owner sells their home within five years, they could be assessed a $5,000 early sale penalty.

This can be an unpleasant surprise and cause problems for families who need to move quickly due to job changes or other life events.

Before signing the contract, make sure you read all the terms of sale.

A market requiring greater transparency

Knowing the hidden costs of building a home helps you avoid unexpected expenses and makes the process less stressful.

For policymakers and advocates, these costs underscore the need for fair marketing practices and policies that protect buyers from financial surprises.

Providing greater transparency in this market can make home ownership more affordable and accessible to everyone.