Ancillary Costs in the Purchase of Homes

The basic legal doctrine governing the transfer of land is relatively simple. Or, to be more accurate, it is not especially difficult to comply with the minimum requirements of the law. Theoretically, the grantor must merely execute and deliver a conventional document. In practice, however, land transfers are sufficiently complex to require the services of a number of persons besides the immediate parties.

Real estate brokers, attorneys, mortgage lenders, public officials, and others play their parts and generally demand compensation. It follows that in the sale of land two distinct costs must be met: first, the gross purchase price; and second, the ancillary charges imposed on the buyer and seller by the other participants in the transaction. We have substantially reliable information about the first of these. But about the second, little or nothing satisfactory is known.

This hiatus is a matter of wonder in the light of the considerable practical significance of ancillary costs. Although charges in individual transactions are frequently small in amount, relative to the sales price, estimates of the aggregate vary from one to three billion dollars per year. The totals given are the products of informed guesses, but it is suspected that error, if any, is the product of over-conservatism. Analysts disagree about what charges to consider and are apt to entirely ignore items of importance.

It is impossible to determine the resulting margin of error, but enough money is involved to warrant at least some inquiry into the amount.