Welcome to my blog where I document projects involving home renovation, staging and design.

Flipping Fairfield Series: Vol. 3 "Closing Costs & Pre-Construction Construction Fees"

Flipping Fairfield Series: Vol. 3 "Closing Costs & Pre-Construction Construction Fees"

Guys, we are almost there…in the next couple of weeks I will get into some of the things you’ve been waiting for- where to splurge and where to save on building materials and finishes (this is an interior design blog afterall), but for now, we have one more very important set of numbers to cover: closing costs and construction fees. Closing costs probably sound straight forward, but construction fees not only consist of what you will be paying to your contractors and subs, but also what you’ll be paying to the town to get the project up and running.

Closing Costs (or money needed at and Before closing to transfer title of the home to you):

  • 1% “refundable” down payment, sometimes called an Earnest Money Deposit, when you put in an offer on the home. If all works out, then this number is applied to the overall downpayment of 10% or 20% at the day of closing. If the contract falls through at no fault of your own, then this will come back to you. So, when putting in an offer on a $400,000 property to flip, expect to immediately write a check for $4,000. It shows the sellers that you are serious about buying their home.

  • Inspection Fees. Even if you know that you’ll be opening every single wall, replumbing and rewiring the whole house and ripping the roof off, it is still wise to get an inspection. Not only does this assist you when negotiating, but you will be better able to budget for costs that you hadn’t already planned on. For example, we once had an inspector pick up on HVAC duct work that was covered in asbestos. Before this discovery, we had assumed we’d be able to use a bulk of the current duct work and splice in new runs where needed. But, now aware of the asbestos, we knew that everything would need to be pulled out properly (asbestos must be handled and disposed of by a special crew- another added cost) and an entirely new unit would be added to our project budget. In Fairfield, inspections run around $550-$650.

  • You must get homeowners insurance before the day of closing. Not only is this necessary for liability purposes, but you will simply not be able to close (at least with a mortgage or construction loan) without this previously in place. When you are speaking with an agent, be sure to disclose that this is an investment property that will have workmen and workwomen on site in order to get the best coverage possible- the last thing you want is to not have enough insurance if an accident does occur. I would love to give you a set number for how much this will cost, but so many factors come into play when an agent determines how much coverage you will need and what your yearly expense will be. Expect to pay at least a few thousand dollars and expect to most likely have to pay that one year in advance. I am also a fan of opening escrow with the mortgage so the additional monthly insurance payments AND property taxes are lumped into your mortgage payment. That way you pay one nice monthly fee to the lender, as opposed to paying multiple parties every month.

  • Appraisal Fee. Nope, the fees aren’t over yet! They just keep adding up-lol (I have to laugh because there really are just so many expenses before you can even begin to think about improvements!) This fee paid by you, the buyer, so that the bank can ultimately determine if the property is in fact worth what you are buying it for- they do not want to over-lend money. In our case, it usually costs around $400, but again this varies from project to project. I imagine that if you buy a property with all cash, then this is a cost that could be avoided.

  • Additional Deposit to bring your offer up to half of your overall percentage down. Since we will put down 20% total, we expect to have to bring the deposit up to 10%. Therefore, mid way through the buying process- usually about 3 weeks to a month after the offer acceptance, we are responsible for making up the difference of 9% (remember that we already put 1% down to secure the sale). At this point in time, on a $400,000 property, a check is written for $36,000.

  • Remaining Down Payment and Lawyers Fees. These are the BIG numbers, but by this point, you’ll be ready for them! If your deposit is 20%, and you’ve completed all of the above steps, you will be writing a fat check for the remaining 10%. But, on top of that, you will be adding in the fees associated with the lawyers time that it took to draw up the contracts (usually a set rate that you agree upon at the start). Again, this ranges from area to area, but plan for a couple thousand dollars on top of the numbers you’ve calculated. This is also when you will be “settling up” with the town and the sellers. So, for example, if there is any remaining oil in the tank, you have to pay for that too.

Now that the house is yours (happy dance!!!!), it’s finally time to start work right!? Nope! Not if you have big plans for the flip! If the only changes you will be making will be cosmetic (paint, tile, new appliances), then jump right in and get to it, but if you plan to change the structure in any way- and that includes taking down even one wall, then stop right there! You must get permits. Do not skip this step- some people may think that they can get away with it, but if suddenly you have changed your home from 4 small bedrooms to a 3 bedroom-one which is now a master suite, or someone helped you put some in some plumbing to change an unused hall closet to a powder room, this will come back to haunt you later. You’ll need to have a C.O. (certificate of occupancy) with the sale and things need to match up with the town- the last thing you want is to have a house that can’t be sold and/or to get hit with fines on top of the money that you’ve already invested. Below is what you may need before work begins:

  • Architectural Plans. It’s inevitable that every property I get involved with needs walls to be removed, moved, and added. I tend to see the value in homes where the floor plans are so wonky that nobody else wants them (that’s what makes a good investment!), but with some structural reworkings, the flow can be dramatically improved. First step, even as a designer, is to bring an architect on board. And depending on the scope of the project, you may also need a structural engineer. These individuals will provide you with fully detailed sets of plans that account for beam specs (necessary when taking down load bearing walls and recessing beams to take on that load, etc.), egresses, and anything else to bring or keep your property up to code. The plans will then be used as a guide for you and the contractors, as well as the the town- they need to see what and how you will be making improvements. I happened to luck out with my architect and engineer, so in comparison to what plans could cost, we are paying a relatively low amount. On this current project, where an upstairs addition was built, a portico added to the front, the entire first floor opened up and windows and doors replaced in completely different locations, we wrote a check that was just shy of $2,500. This is low considering I have had bids from other architects on other much smaller projects come in at double that!

  • Permits. Every town that you live in is different and will set rates as well as what paperwork is necessary to approve a project. The town of Fairfield determines how much you will pay for permits when you provide an estimate of the cost of the work that will be done. If you plan to pay $150,000 in renovation costs then what you pay the town will be based on that amount of work. We recently paid about $2,600 to Fairfield to start our last project. For our most recent renovation, we had to pay 3 different departments: building, zoning, and conservation.

  • Surveys. These are not always needed, but make sure to have them at the ready when you are building an addition, changing the roofline, or doing anything to change the property’s exterior footprint. Something as simple as adding a few steps and a landing at the front door may require a survey to get the permits approved. These usually take a couple weeks to produce (I’ve been fortunate enough to work with someone who can turn the plans around in a week) and if you have them drawn up before you go to the town for permits, your timeline should remain on track. The last thing you want is to become delayed waiting for things that you can have ready ahead of time. A surveyor will most likely charge around $2,000-$2750.

At this point, work hasn’t even begun at the flp yet! All of the above costs and plans are only in preparation for the renovation to begin. But, once these boxes are checked, the fun commences! Check in next week to see what you can expect for actual construction costs (I’ll break it down into each category you’ll need to consider- demo, framing, roofing, flooring, plumbing, electrical, and so so much more!).

As always, feel free to leave a comment or send me an email with any questions you may have!

Love and Creativity,


Fairfield U Flip project by the Rath Project
One Room Challenge 2019: From Out of Fad to Fab Farmhouse Living

One Room Challenge 2019: From Out of Fad to Fab Farmhouse Living

Flipping Fairfield Series: Vol. 2  "Financial Health & Loan Options"

Flipping Fairfield Series: Vol. 2 "Financial Health & Loan Options"