So you’re paying for your new property in cash. Congrats!
Making a home purchase with cash can give you a lot of power at the negotiating table. But at the same time, it can also leave you stuck wondering who’s paying for the closing costs. To make sure you’re fully prepared, read on for our full breakdown of closing costs, how the payments are split up, and more.
The full breakdown: closing costs for cash offers
Before we dive into who pays what, let’s look at the different types of closing costs associated with a cash purchase.
Your cash purchase won’t involve a lender, so you’ll be able to skip credit check fees, origination and processing fees, and the costs of paying mortgage points up front. But that doesn’t mean you can just hand the seller a bag of money and call it a deal.
Below, we’ll cover all the closing costs involved with a cash sale.
Earnest money deposit
Cost: 1-3% of purchase price
An earnest money deposit is a sum of money that buyers put down to show that they are serious about purchasing a property. Also known as a good faith deposit, this money is typically held in escrow until the sale is finalized.
The amount of an earnest money deposit usually depends on the location of the property, the current market conditions, and the terms of the purchase agreement. In some cases, the deposit may be returned to the buyer if the deal falls through – or even fully forfeited, under certain circumstances.
Cost $300 – $400
An appraisal is a professional assessment of the value of a property. This assessment is conducted by a licensed appraiser who has specialized training and expertise in determining the value of properties.
Lenders typically require appraisals to ensure that they are not lending more money than the property is worth. If the property were to lose value after the loan is issued, then the lender would be at risk of not being able to recover the full amount of the loan. By requiring an appraisal, lenders can ensure that they are lending an appropriate amount of money based on the value of the property.
If you are paying for a property in cash and are concerned about overpaying, you may want to consider getting your own appraisal. This can provide you with a professional assessment of the value of the property and help you decide whether to proceed with the purchase.
If you have any questions about appraisals or any other aspect of the mortgage process, Total Mortgage’s team of loan experts is available to help. Contact a loan officer today to learn more.
Cost: $200 – $800 (depending on property size and location)
A property inspection is a detailed examination of a property’s condition that is conducted by a licensed professional. Property inspections are not typically required, but they are highly recommended for buyers because they can provide valuable information about the condition of the property.
During a property inspection, the inspector will thoroughly examine the property to identify any issues that may need to be addressed. This can include structural problems, electrical and plumbing problems, and more. The inspector will also look for any signs of pests, such as termites or mice, that could cause damage to the property.
After the inspection, the inspector will provide a report detailing any issues that were identified. This report can be used by buyers to negotiate with sellers or to decide whether to proceed with the purchase. For example, if the inspection report reveals significant issues with the property, buyers may be able to negotiate a lower price with the seller or may decide to walk away from the deal altogether.
Cost: $600 – $900
Survey fees, also known as boundary survey fees, are charges that are incurred when a property owner or prospective buyer wants to verify the property lines of a piece of land. This is typically done when a property is being transferred from one owner to another or when a new construction project is being planned.
Survey fees are not always required for all real estate transactions, but they can be particularly important for certain types of properties. For example, if a property is a large plot of land or is undeveloped, a survey may be necessary to accurately determine the boundary lines. This can help prevent disputes with neighbors over property lines and ensure that any new construction on the property is within the proper boundaries.
Survey fees can vary in cost depending on the property’s size, location, and even local regulations. Some lenders may require a survey to finance a property, so it’s important to understand whether it will be necessary for your situation. In general, a survey fee may be worthwhile for those in special circumstances where the accurate determination of property lines is particularly important.
Cost: about $1,000 (depending on property value)
Title insurance is a one-time fee that protects buyers from any issues with the property’s title. Lenders usually require buyers to purchase title insurance to cover their stake in the property, but buyers who are paying in cash have the option of choosing whether to get it. Buyers who pursue title insurance should expect a fee of around $1,000 depending on the value of the property.
While title insurance may seem like an unnecessary expense for some buyers, it can provide peace of mind and protection against any potential issues that may arise with the property’s title. It’s important to consider whether title insurance is worth the investment based on the specific circumstances of your real estate transaction.
Title search fee
Cost: $100 – $250
Whether you choose to pay for title insurance or not, most states will require you to conduct a title search to fully transfer ownership of the property.
A title search is a process that involves reviewing the public records related to a property to establish its line of ownership and payment history. A thorough title search can identify any issues with the property’s title that may need to be resolved before the transfer of ownership can take place. This can include issues such as liens, judgments, or unpaid taxes that may need to be addressed before the property can be legally transferred to the new owner.
A title search can also be a good idea for buyers who are concerned about the history of the property they are purchasing. By better understanding the property’s background, buyers can make more informed decisions when making their home purchase.
Cost: varies by company and property
Escrow fees are charges that are incurred when a third party is hired to oversee the transfer and payment of funds during a property purchase. Escrow companies perform a variety of tasks during the home-buying process, including collecting and disbursing funds, reviewing documents, and following up with all parties involved. When it comes to closing, escrow companies also ensure that everything goes smoothly and all necessary documents are signed.
Escrow fees are often split equally between the buyer and the seller with each party paying half of the total cost. The exact amount paid will depend on the specific services being provided and the location of the property. Escrow fees are not always required for all real estate transactions, but they can be a valuable resource for buyers and sellers as they provide protection and ensure that the financial aspects of the transaction are handled efficiently.
Visit our full guide on escrow for more information.
Cost: about $100
A notary is a person who is authorized to witness the signing of legal documents, such as those related to the purchase of a home. Their presence is important because it helps ensure the authenticity of the documents being signed and the transfer of ownership.
Depending on where the final closing documents are signed, the fee for a notary may be waived. Some lenders or title companies may have a notary on staff who can provide these services for free, while others may charge a separate fee for this service. It’s important to understand whether a notary fee will be required in your situation and to budget accordingly.
Cost: $400 – $1,500
In some states, it is common for both the buyer and seller to have their own attorneys to oversee the sales contract and closing process. These attorneys play a critical role in ensuring that the terms of the contract are fair and that the closing process goes smoothly.
The cost of hiring an attorney for a real estate transaction can vary dramatically depending on the specific services being provided and how the attorney bills for their time. Some attorneys may charge by the hour, while others propose a flat fee or a percentage of the property’s sale price. In general, it is possible to negotiate and shop around for legal services, so it’s important to do your research and find an attorney who meets your needs and fits within your budget.
While the presence of attorneys may be required in some states, it is not always necessary in every real estate transaction. In some cases, buyers and sellers may choose to handle the sales contract and closing process themselves or work with a third party to handle these tasks. Ultimately, the decision about whether to hire an attorney will depend on the specific circumstances of your real estate transaction and the laws of your state.
Who pays for closing costs in a cash sale?
When it comes to paying for closing costs in a cash sale, there are some general rules about who is responsible for paying what. However, there is often room for negotiation and flexibility, particularly if the buyer is paying for the property in cash.
If a buyer is paying for a home in cash, this can be attractive to sellers because it means that there is no risk of the lender refusing financing at the last minute. In this case, the buyer can have a low credit score or lose their job and still follow through with the purchase, as there is no external factor that could prevent the deal from going through.
While most fees and expenses associated with buying a home are typically paid for by the buyer, it is still possible for some of them to be paid by the seller if the right agreements are reached. The specific arrangements will depend on the circumstances of the transaction and the willingness of both parties to negotiate. In other words, paying in cash offers more flexibility than the average transaction and could prove beneficial for both the buyer and seller.
If you have any questions about purchasing a home with cash and the closing costs involved, contact a Total Mortgage loan expert today.
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