Cash Offers and Closing Costs: What You Need to Know
Cash offers offer several advantages over traditional home financing options. However, though they eliminate the costs and time needed for the lender process, they are not exempt from standard closing fees and expenses.
By working with the experts at Mark Spain Real Estate, you can ensure you take all the proper steps toward a successful real estate closing. With decades of valuable industry experience, our team offers exclusive market insight to help prepare you for the financial complexities of the closing process. If you’re accepting or putting down a cash offer on a home, we’re here to help further your understanding of cash offers and their closing costs.
Cash Offers and Closing Costs: What You Need to Know
What are Closing Costs?
Closing costs are additional fees for home buyers and sellers at the end of a real estate transaction. Some fees are given to the buyer and seller, while others are exclusively charged to one of the parties. 
Typically, home buyers have to pay more closing costs, especially if they have taken out a mortgage loan. However, by extending a cash offer, home buyers avoid standard closing costs associated with traditional financing options like appraisal, loan application, underwriting, and credit report fees.
Are There Closing Costs with a Cash Offer?
Though cash offers eliminate the expenses associated with mortgage financing, they still have their fair share of closing costs for home sellers and buyers. Most of these costs involve title work, transfer fees, taxes, and insurance.
While home buyers put forth fewer closing costs with a cash offer, sellers typically pay the same fees as they would with a traditional financing option. Some fees are exclusive to buyers or sellers, while others are shared between the two entities.
Title Search
Buyers and sellers will work with a title company to perform a title search on the home to ensure everything is in order with ownership titles.
Owner’s Title Insurance
Buyers and sellers will pay for a title insurance policy to protect their property ownership during closing. This one-time charge is a precaution if the title search fails to uncover major ownership disputes.
Attorney Fees
Most closings have a real estate attorney present. Most states make this a requirement during home closings. These fees will vary based on your state.
Transfer Taxes
The state government imposes a tax on the transfer of title from one owner to another. These taxes are calculated as a percentage of the property’s sale price.
Courier Fees
Transporting documents for real estate closings requires a small fee. In most cases, important documents can be delivered electronically. However, buyers and sellers should still make room for this cost in their closing budgets, just in case.
Escrow Fees
Title companies will charge escrow fees for holding purchase funds until the deal is finalized. These costs typically account for 1-2% of the home’s purchase price.
Property Taxes
Sometimes, states will charge property taxes before the closing is finalized. Sellers would take care of this charge and then be reimbursed by the buyer for a portion of the taxes when the property ownership is officially transferred.
Homeowners Insurance
Buyers will have to invest in homeowners insurance at closing. Homeowners’ insurance premiums will vary depending on the buyer’s coverage, location, home value, home size, and more.
HOA Transfer Fee
Depending on the property’s neighborhood, you might encounter HOA fees at closing. If the home is associated with a homeowners association, there will be a transfer fee separate from annual HOA dues that accounts for the transfer of home ownership from one owner to another.
Real Estate Agent Commissions
Real estate agent commissions are the most significant closing expense for sellers. Generally, commission costs 4-6% of the home’s sale price. The seller will pay the whole percentage to their agent, who will then split the commission with the buyer’s agent. In cases where the same agent represents both the buyer and the seller, the agent receives the full commission.
Get a Cash Offer on Your Home with Mark Spain Real Estate
Are you closing on a home with a cash offer? The industry professionals at Mark Spain Real Estate are here to tell you what to expect with closing costs. Delivering unparalleled customer satisfaction, our team of expert listing consultants will help you navigate your real estate closing hassle-free! Check out our Guaranteed Offer Program for the potential to receive a competitive cash offer on your home in only 21 days. Contact our agents today!
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