If you’re buying or selling a home for cash, you might wonder, are there closing costs with a cash sale? This is important to determine for both buyers and sellers, as expensive closing costs can reduce a seller’s profits or increase a buyer’s costs significantly!
Cash home sales still come with closing costs, including but not limited to appraisal fees and inspection fees, title insurance and search costs, and attorney fees. The actual costs you’ll face will depend on your state, your sales agreement, and other factors, but they can add up to some 3% of the home’s selling price.
Since no two home sales are alike, it’s impossible to determine the closing costs with a cash sale you might expect. However, knowing a bit more about closing costs in general can help you determine what you might face when selling a home.
As always, discuss any questions you have about a home sale or purchase with a real estate agent or attorney, and read all agreements carefully before signing! This will ensure you understand that agreement and make the best financial decision when it comes to your home sale.
Note some standard closing costs that should be expected with virtually any home or vacant land sale, so you can know what to expect when it comes to selling your home for cash!
Earnest money refers to a deposit from the buyer, held in escrow, that lets the seller know the buyer is serious about purchasing the home. The actual amount of this earnest money payment, if any, will be determined by state law, local real estate market and demands, the contract signed by the buyer and seller, and other such factors.
In many cases, earnest money deposits might cost 1% to 3% of the home’s purchase price. Note, too, that whether or not the buyer gets this money back if the deal falls through will be written in the sales contract.
Mortgage lenders typically require appraisals, but this doesn’t mean that a cash buyer won’t need an appraisal for your home! Many cash buyers rely on the advice of a professional appraiser when it comes to making an offer for a home and then negotiating with the seller. Most appraisals cost between $300 and $400.
As with appraisals, mortgage lenders typically require inspections before signing off on a home loan; however, cash buyers might also insist on an inspection before presenting an offer. An inspection will note if various materials are up to local codes, and if the home will need costly repairs anytime soon.
Buyers might also schedule additional inspections for a home, to evaluate factors not included on a standard inspection. For example, most real estate inspections don’t check for mold, termite or carpenter ant damage, or asbestos, and don’t include exterior structures such as wells or septic tanks. Most inspections cost between $200 and $800 each.
Land surveys note a plot’s legal boundaries. A homebuyer might not need a survey for urban properties, as these boundaries are typically marked by sidewalks, fences, driveways, and the like. However, for rural properties, larger lots, or other areas where the legal boundaries might be in question, a buyer might schedule a survey.
Verifying property lines is also vital for a buyer planning on land improvements; he or she will need to know where their property ends and a neighboring property begins before erecting a fence, as an example. Boundaries can also affect property taxes. While surveys are expensive, often averaging between $600 and $900, they are often worth that cost for buyers.
A title search establishes the history of ownership of a home or other property; this search will reveal if there are liens against the home, such as for unpaid taxes. Many states require a title search be performed before a home sale, and costs might average between $100 and $250.
Title insurance protects a new owner from challenges to their ownership for as long as they have that title in their name. While title insurance is often required by a mortgage lender, many cash buyers still purchase it as an added protection for themselves. Title insurance might average around $1000, depending on the home’s value.
Escrow refers to a neutral third party, usually a bank or other financial institution, holding a sum of money until certain terms are met. That institution doesn’t do this for free, so there are almost always escrow fees involved in home sales! Most escrow costs are between 1% and 2% of the home’s sale price.
A notary public verifies that a person signing a piece of paper is actually that person! A notary is often hired to sit in on a closing and will notarize everything as it is signed; expect their costs to run about $100 for the entire closing.
Some states require an attorney present during a closing, to ensure both buyers and sellers understand their rights and obligations, and all the “fine print” of their agreement. Attorney fees vary greatly from state to state and these costs are negotiable, but they might average between $400 and $1000 for a standard closing.
There is no simple way of calculating exact closing costs on any home sale, as attorney fees, title search costs, and other costs will vary from state to state and closing to closing! However, you might note some costs you can expect no matter the home’s price or location; for example, title searches, escrow, and notary costs are somewhat standard expenses even for cash sales.
A home seller or buyer might also “play it safe” and expect to pay up to 3% of the home’s sale price in closing costs. Three percent translates to $300 for every $10,000 and $3000 for every $100,000. As an example, if you sell your home for $50,000 in cash, closing costs might total $1500.
Buyers and sellers always negotiate between themselves when it comes to closing costs; when a home sale involves a mortgage loan, those costs are often “rolled into” the loan itself, so that the buyer pays the costs but over time, with the rest of their mortgage loan. In some mortgage loan cases, the seller might pay closing costs, taking those expenses out of the money they receive for their home.
For cash sales, the buyer often pays those closing costs themselves but might lower their offer slightly, to compensate for those added fees. They might also avoid many of those fees because they don’t need to satisfy the demands of a mortgage lender; for example, they might not rely on a professional appraisal or inspection, but might only examine the property on their own. In turn, they might not lower their offer as much as if they were paying all the closing costs during a standard sale with a mortgage involved.
There are a number of reasons why it’s better for a seller to work with cash offers rather than those needing a traditional mortgage. One important consideration is that a home seller doesn’t need to worry about a cash buyer losing their job unexpectedly, or otherwise becoming ineligible for a mortgage while in the process of buying. Cash sales rarely fall through, as can happen when dealing with a mortgage lender!
Cash home sales are also not as rare as you might think; according to Home Go, cash sales account for some 22% to 24% of single-family home and condo sales across the United States. In Florida, Georgia, and North Carolina, those numbers are even higher, as cash sales account for some 32% to 40% of home sales in those states!
While only a real estate agent or attorney can advise you on the right choice for your home sale, note some reasons why many homeowners turn to cash buyers and especially those ensuring a fast purchase:
Whether it’s an individual buyer or a company specializing in cash home purchases, there are many reasons why a cash sale is beneficial for the buyer as well as the seller. Knowing why some buyers prefer cash sales can help a homeowner better present their home, and know what to expect throughout the process! Consider some common reasons for buyers to prefer cash purchases versus standard mortgages, and why they might purchase distressed properties in particular:
Whatever the reason for a cash purchase, remember to include closing costs with that cash sale. This will ensure both buyers and sellers are prepared for that sale and know what to expect by way of costs and profits.
Bradenton Home Buyers - Sell Your House For Cash Fast is proud to offer this information to our readers and we hope it helped answer the question, are there closing costs with a cash sale. If you’re looking to sell your house for cash, fast, call us today! We are the leading experts in cash for homes in Bradenton, and our experienced team will ensure all your questions are answered every step of the way. To find out more or schedule your FREE consultation, call Bradenton Home Buyers - Sell Your House For Cash Fast today!