Closing Costs are Giving Sticker Shock to Home-Buying Millennials
Millennials are the largest home-buying segment in the U.S. right now and yet, when the time comes to purchase a house, many of them have no idea that they'll probably have to pay several thousand dollars in closing costs.
A national survey by ClosingCorp found that about two-thirds of potential homebuyers between the ages of 18 and 34 were unfamiliar with closing costs. In comparison, only 16 percent of possible homebuyers between the ages of 35 and 44 were unaware of closing costs.
"Much has been written about millennials because they are the largest generation so far in U.S. history, and their long-standing impact on the real estate market and economy is going to be huge," said Brian Benson, CEO of ClosingCorp in a press release published on March 25. "Their buying behaviors are much different than previous generations, and of particular concern to the industry is that they are waiting longer to buy their first homes."
Benson said the study emphasizes the need to better educate all consumers, especially millennials, on the real estate closing process.
According to the survey, most people learn about closing costs from realtors or by doing their own research. Millennials are more likely to learn about closing costs from a realtor as opposed to a lender by a ratio of nearly two to one.
"This is not too surprising because the process is very confusing and most millennials have never gone through it before. We found that the first step most millennials are taking is looking online for information about the home-buying process overall. And being that there are different standards for every area, they may not be knowledgeable of their own local areas as they gather the information," said Jessica Lautz, director of survey research and communications with the National Association of Realtors. "What they really want from their agent is to help them understand the process."
When it comes to closing costs in New Jersey, they vary from location to location, but for the most part, a homebuyer can expect to spend 3 to 6 percent of the cost of the sale price of the property, according to numbers from the New Jersey Association of Realtors. A study by Bankrate.com in 2013, listed New Jersey as having the seventh highest closing costs in the nation, averaging $2,545.
"It's important for agents to understand that when it comes to millennials, they have to understand that they have never done this before, so they are looking for someone to walk them through the process," Lautz said. "For the buyer, I would say ask, ask, ask. There are no stupid questions. And make sure you have an agent on your side who can help you. Also, ask questions of friends and family who have gone through the process."
For more information, visit http://www.closing.com.