There are many benefits to purchasing a home with cash as opposed to taking on a mortgage. Paying cash means you won’t have to pay interest on a loan. However, people worry that paying in cash means they’ll have to find extra money for the closing costs. Cash home buyers in Virginia may wonder what fees the seller has to pay when selling a house. Hr property doctor can help you understand who pays closing costs on a cash sale. There are costs traditionally associated with the buyer and seller, so buckle up because we are going to find out if using cash will change the responsibility of any of those fees.
What is closing cost ?
A closing cost is the last step in buying a house. Closing costs are fees you pay at the end of a real estate transaction. Buyers and sellers both pay closing costs, but buyers usually have to pay more. closing costs on a cash sale are typically made up of processing fees paid to the lender, escrow funds, title company fees, government fees, and more. If you’re buying a house with a mortgage in Virginia , you can expect your closing costs to equal approximately 2-5% of the purchase price with the average amount of 1.7%. However the amount you may will vary on the number of factors like (the type of the loan you get, the purchase price of the home etc ). At the closing, you and all of the other parties involved in the transaction sign all of the necessary documents. This may include some combination of.
- Your realtor or real estate agent
- Your title and/or escrow company
- Your attorney
- The seller
- The seller’s attorney
- Your mortgage lender
Breakdown of the Closing Cost
Here are some of the closing cost that you have to pay during the closing process, as well as some optional cost that can provide value to you.
- Initial Deposit (Held in Escrow)
- Appraisal
- Property Inspection
- Survey Fee
- Title Insurance
- Title Search
- Escrow Fees
- Notary Fees
- Attorney Fees
Not all of these costs will be necessary and will largely depend on what the buyer and seller feel comfortable opting out of.
Cost Saving Advantages for Cash Buyer
As a cash buyer, you do not have to pay the following closing costs:
- Appraisal fee
- Credit report fee
- Loan origination fee
- Loan discount points
- Application fee
- Underwriting fee
Those fees add up fast! If you give cash offer,you can bypass all these additional fees and with which, you will save thousands of dollars at the closing table.
Who Pays Closing Costs on a Cash Sale?
Closing fees can often be included as part of the deal. If you are buying a property with cash, you will usually be able to get the seller to agree to cover the closing costs. While most of the fees listed above 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.
Closing costs for the buyer on a cash deal
In general, buyers pay more closing costs than sellers. Even though closing costs on a cash sale associated with the loan tend to make up a significant portion, cash buyers shouldn’t dismiss other fees due so they don’t get a big surprise on closing day! Here are the expenses cash buyers can expect to pay at closing.
1. Title Insurance & Title Search Fees
Title insurance is intended to serve as a form of safeguard for unforeseen title problems that may come up after you’ve taken ownership of the property. In addition, the title search is a requirement by most states. The purpose is to ascertain that the seller is indeed the legal owner of the property. Further information such as potential undisclosed claims like liens and wills could be checked for too. All of these are necessary to verify ownership. If there are other things to be on the lookout for, Hr property doctor would expertly guide you in these processes.
Title Search and Title Insurance Fee in Virginia
Since Virginia does not have state regulation over title insurance or title search fees, these might vary based on the title company, the cost of the property at purchase, and the intricacy of the title search.
| City | Title Search Fee Range | Owner’s Title Insurance (0.5% – 1% of Purchase Price) | Lender’s Title Insurance (0.5% of Loan Amount) |
|---|---|---|---|
| Virginia (Statewide) | $250 – $500 | 0.5% – 1% of Purchase Price | 0.5% of Loan Amount |
| Chesapeake | $250 – $500 | $1,500 – $3,000 (avg. home price $300,000) | $1,200 (avg. loan amount $240,000) |
| Franklin | $200 – $400 | $1,250 – $2,500 (avg. home price $250,000) | $1,000 (avg. loan amount $200,000) |
| Hampton | $300 – $500 | $1,500 – $3,000 (avg. home price $300,000) | $1,200 (avg. loan amount $240,000) |
| Newport News | $250 – $450 | $1,500 – $3,000 (avg. home price $300,000) | $1,200 (avg. loan amount $240,000) |
| Norfolk | $300 – $500 | $1,800 – $3,600 (avg. home price $360,000) | $1,440 (avg. loan amount $288,000) |
| Petersburg | $200 – $400 | $1,000 – $2,000 (avg. home price $200,000) | $800 (avg. loan amount $160,000) |
| Portsmouth | $250 – $450 | $1,500 – $3,000 (avg. home price $300,000) | $1,200 (avg. loan amount $240,000) |
| Suffolk | $250 – $400 | $1,250 – $2,500 (avg. home price $250,000) | $1,000 (avg. loan amount $200,000) |
2. Appraisal Fees
An appraisal is necessary for the buyer to ensure that he’s buying a great property. One way to guarantee that you’re not overpaying for a house is to request an appraisal and include it in the purchase agreement. The payment for this is usually in the range of $300 to $375 in Virginia for single family home and the wider range includes the entire gamut of potential costs that are impacted by different variables are $250 to $1200.
The appraisal itself could be done in minutes or a couple of hours depending on the property size. For the report, this might take a couple of days to compile. This is because the appraiser has to consider factors like:
- Property type: Single-family homes are usually less expensive to appraise than condos, multi-family homes, prefabricated homes, or luxury properties.
- Property location: Compared to metropolitan or high-demand locations, fees may be lower in rural areas.
- Property complexity: More elaborate ownership arrangements, larger residences, or distinctive architectural elements may result in higher rates.
- Appraiser’s experience and reputation: Reputable or more seasoned appraisers may bill more.
- Urgency: Extra charges are typically imposed for expedited appraisals.
Depending on the outcome of the appraisal, you could either renegotiate the deal or go along with it. Here are the possible outcomes:
- The house is worth less than the price tag
- The house is worth the price tag
- The house is worth more than the price tag
3. An Inspection Fees
An inspection fee in Virginia varies depending on the property size, ranging from $325 to $400 for general home inspection. The inspector looks for different things than the appraiser does, so you don’t want to skip this step, though it’s optional. An inspector will find issues like electrical, plumbing, or structural problems that could cost you more once you’re the homeowner.
4. Earnest Money Deposit
To show that you’re indeed intentional about purchasing the house, a payment known as the Earnest Money Deposit (EMD) is required. Usually, this payment would remain in escrow until closing. Two factors that influence the exact amount paid as EMD include:
- Economic factors, for instance, house demand in the specific area
- The terms stated in the purchase agreement
This would typically cost around 1% to 3% of the purchase price in Virginia. To ascertain the specific amount, a professional flat fee realtor from Hr property doctor can offer some guidance. You should consult with your realtor because they would be in the best position to determine what could be viewed as a competitive sum. At the end of the sales process, the money comes out of escrow and is included in your payment at closing.
5. Escrow Fees
Otherwise known as the closing fees, these are usually held by the title company. The company is an independent third party in the process and would typically take charge of deed recording, paperwork, disbursing monies exchanged in the process, as well as the transfer of title.
Rather than pay a flat fee, escrow fees are usually a percentage of the home sales price and is determined by:
| Fee Type | Typical Range | Factors Influencing Cost |
|---|---|---|
| Monthly Escrow Fee | $20 – $50 | Loan amount Property taxes & homeowner’s insurance complexity Escrow servicing company |
| Initial Setup Fee | $150 – $300 | Loan amount Escrow servicing company Complexity of initial paperwork |
| Annual Statement Fee | $25 – $50 | Escrow servicing company |
| Disbursement Fee | $10 – $25 | Number of disbursements per year Escrow servicing company |
7. Homeowner Insurance
Buyers would have to pay the total yearly premium on their homeowners’ insurance at closing. This policy usually varies based on factors like:
- House location
- Size and value of the home
- Deductible to calculate on premium
- Coverage amounts
If your home is sited in an area that is prone to natural phenomena like flooding or an earthquake or any accident like fire, your policy might list these as well to protect you against them.
How Long is the Closing Process in Virginia ?
In Virginia, the closing process for a house purchase might take anywhere from 30 to 60 days, on average. However, based on a number of variables, this chronology may differ significantly:
- Type of loan: While government-backed loans such as FHA or VA loans may need more paperwork and approvals, conventional loans often have speedier closing timelines.
- Lender efficiency: The speed of the process is affected by the many lenders’ different processing schedules and modes of communication.
- Complexity of title search: Properties with complicated ownership histories or possible title problems may need more extensive and prolonged title searches, which could cause the closing to be delayed.
- Delays in appraisals: Unexpected events or backlogs at appraisal firms may cause the timeline to extend.
- Purchase agreement contingencies: These could include finance, inspection, or other requirements that need more work before closing. They could also cause the closing date to be extended.
- Communication and responsiveness: All parties involved should communicate promptly and address any paperwork or obligations that come up (lender, buyer, seller, real estate agents,etc.) can expedite the process.
Closing Costs for the Seller on a Cash Deal
The closing costs for the seller do not change much for cash offers versus non-cash offers.
The highest cost to the seller is usually the realtor commission unless they sell their house themselves. In Virginia sellers typically pay 5-6% of the total sale price to their listing agent, who then splits the commission with the buyer agent. This is how real estate agents get paid — the buyer typically does not pay their agent. Here is the table off all the closing cost that the seller have to pay.
| Cost Category | Typical Range | Description |
|---|---|---|
| Real Estate Commissions | 5-6% of Sale Price | Commission fees split between listing and buyer’s agent (if any). |
| Recordation Tax | 0.5% of Sale Price | State-imposed tax on the recorded deed. |
| Prorated Property Taxes | Varies based on sale date and annual property tax | Seller pays taxes accrued up to closing date. |
| Homeowner’s Association (HOA) Fees | Varies based on HOA rules | Any outstanding HOA fees must be settled by seller. |
| Lender’s Title Insurance (Optional) | 0.5% of Loan Amount (if applicable) | Seller may choose to purchase this if buyer uses financing. |
| Additional Costs | Varies | Attorney fees, outstanding liens/judgments, moving expenses (not technically closing costs). |
In addition to agent commission, sellers pay:
- Transfer tax
- Title insurance
- Escrow fees
- Closing fees
- Attorney fees
- Prorated property taxes
- HOA fees
- Mortgage payoff and prepayment fees
In total, sellers pay closing costs to equal roughly 8-10% of the sale price if they do not pay any of the buyer’s closing costs. Sellers pay more in closing costs than buyers, but their fees and taxes are deducted from the sale of the house so they rarely need to bring any money to closing.
Transfer taxes
States and/or local jurisdictions require a one-time tax paid upon the transfer of title from the previous owner to the new owner. Transfer taxes are calculated based on the price of the property. Percentages vary by state, so look into your state’s transfer tax rate before you buy.
HOA Fees
If your property is located in a neighborhood with an active homeowners’ association, your transfer fees could see some increase. Outside of annual dues that are non-negotiable, you would also be required to cover the cost of recording and distribution of paperwork by the HOA board.
Attorney Fees
Some states require that an attorney review the title and/or be present at closing. Attorney fees vary significantly from one state to another, so we recommend speaking to an escrow officer at a title company near you to learn more.
Does It Make Sense for a Seller To Consume Costs During a Cash Sale?
Closing fees can add a lot of money to the home buyer, but the buyer’s agent can outline the closing costs for the seller. Some people still work with a real estate agent when buying a house in cash, so you’ll consider the realtor fees or agent commission.
Many people also use a lawyer when conducting a cash sale. You’ll have to pay your attorney fees on the real estate transaction.
It’s easy to overlook other fees you’ll take on after signing the purchase agreement, like those related to a homeowners association. HOA fees can kick in as soon as you pay the closing fees on a property.
You also need to consider how much it will cost to take on homeowners insurance and transfer taxes into your name. Some states allow prorated property taxes for the first time a new owner pays for the taxes, but the insurance policy kicks in immediately in full.
During a standard real estate transaction, you could include these expenses in the loan amount. However, without a mortgage loan in play, the total cclosing costs on a cash sale and move to the new home could put the ease of a cash sale and sellers are more inclined to negotiate.
In a regular deal with lenders involved, the seller would only have to pay a few fees, like their real estate agent’s commission, half the escrow fees, and any prorated property taxes of HOA fees. However, with the previously-listed additional costs in mind, many sellers take on the closing fees when the buyer is paying cash to simplify the process.
Final Considerations for Closing Costs in a Cash Sale
If you have a cash offer for a home sale, you can try to negotiate with the seller. While the buyer’s closing costs can be a long list of items, buyers pay the sale price in cash and can negotiate that the sellers pay these expenses. A cash offer always stands out in a bidding war, so it’s worth negotiating with the seller to see what they’re willing to pay. Cash offers from individual buyers or companies that make offers on as-is properties should at least split your closing costs in half, if not result in the seller taking them on completely.