So you’re paying for your new property in cash.
That decision gives you a lot of power at the negotiating table. Of course, it can also leave you stuck wondering who’s paying the closing costs.
Your closing cost breakdown: the complete list
Before we get into the knitty gritty of who pays what, let’s take a look at what costs you’ll actually need to worry about.
Since you won’t be working with a lender, you’ll be able to skip a lot of the fees that come along with it, like credit check costs, origination and processing fees, and paying mortgage points upfront. But that doesn’t mean you can just hand the seller a briefcase full of money in exchange for keys and call it a deal.
Below, we’ll cover the costs that will still crop up, as well as the optional costs that could still provide value to you.
Earnest money deposit
Earnest money (which is held in escrow) is how sellers know you’re serious. Keep in mind that how much money you hand over upfront depends on a lot of factors, like your state, your market, and the contract you’ve agreed to. Whether or not you get this money back if the deal falls through will also be specified in the purchase agreement.
Cost: typically 1-3% of the purchase price
Generally, your mortgage lender would require an appraisal so they don’t end up lending you more money than the property is worth. But if you’re going it alone and concerned about overpaying, having your own appraisal done is a smart move.
Much like an appraisal, a property inspection won’t be required of you. However, it’s definitely in your best interest to get one on your own. An inspection will find any problems with the house, giving you room to negotiate or even to walk away if the renovations required are too involved.
Cost: $200-800, depending on the size and location of the property.
If you’re buying a large plot of land (especially undeveloped land) you might feel the need to verify the property lines. This won’t be required of you, but those in special circumstances, it might be worth it. Keep in mind, it’s pricey, though.
Title insurance is yet another thing you don’t need, but might opt for anyway. It’s a one-time cost that protects you from title issues for as long as you own the property. Typically, a lender requires you to buy insurance to cover their stake in your property, but without one, the choice is yours.
Cost: around $1,000, but it will depend on the value of your home.
Title search fee
Whether or not you choose to get insurance, most states still require you to do a title search before the transfer of a property. This establishes the line of ownership and payment going back decades, ensuring that you are actually able to purchase the house.
Escrow companies exist to act as a neutral third party in the transfer and payment of money during the homebuying process. But they don’t work for free. Keep in mind that buyers and sellers tend to split this fee 50/50.
Cost: varies by company and property. You’ll want to shop around for the best price.
In order to properly close, you’ll need to notary to witness the signing of documents. Depending on where you sign the final closing documents, this fee may be waived.
Cost: around $100
Some states require a buyer’s and a seller’s attorney to oversee the sales contract and closing. The cost can vary dramatically, depending on how the attorney you hire bills this kind of service. You will, however, be able to negotiate and shop around for this service.
Who pays closing costs in a cash sale?
Okay, so now we know what needs to get paid, it’s time to talk about who’s doing the paying. This is where things get interesting, as there are few hard and fast rules about who pays what.
Paying for home in cash means there’s no lender to refuse financing at the last minute. It means the buyer can have a low credit score or lose their job and still follow through with the purchase just fine. It means there’s no external reason why the deal won’t go through.
In all but the hottest markets, that’s a seller’s dream come true. And it puts you in a position to negotiate on more than just sale price.
While most of the fees we’ve discussed typically fall to the buyer in one way or another, many of them can also be paid by the seller if the right agreements are reached. It all depends on your specific situation and how much you’re willing to haggle.