Closing costs on a cash sale are required, just as they are for any other sale of a home. Regardless of the type of sale, closing costs are often a factor that many people overlook or neglect to plan for. Here is some crucial information you need to know about closing costs for a cash sale of a house.
Closing Costs on a Cash Sale
What are Closing Costs?
The closing costs on a cash sale is a combined amount of money that covers the payments for various expenses that go along with the sale. These expenses include attorney’s fees, title searches, title insurance, taxes, lender costs, escrow fees and homeowner’s insurance payments among others costs. Some of these fees are negotiable, but others are not. Normally, closing costs range between two and five percent of the purchase price of the house. Buyers generally pay the largest portion of the closing costs, but occasionally, the buyer can negotiate with the seller for the seller to pay a larger portion of them.
Earnest Money and Escrow
When a person or entity purchases a house for cash, the closing costs are paid through the escrow account. When you purchase a house, you need to pay earnest money upfront to show that you are serious about the sale. This money goes into an escrow account. An escrow account is a safe place to put money that makes it easy to manage the money you need for the home. The earnest money you pay will be applied to the purchase of the house on the day the sale is completed.
Closing Costs on a Cash Sale are Paid Through the Escrow Account
In most cases, the cash buyer pays all of the closing costs. Closing costs on cash deals are often less than financed deals, as there are no inspection fees or lending costs that need to be paid. A cash buyer will normally pay the closing costs through the money that was placed in the escrow account. The cash buyer will submit full payment for the house, including the closing costs plus an extra few hundred dollars to allow for unexpected costs, to the escrow account. Since it is illegal for a house to be sold through a literal cash transaction, the payment must be done via wire transfer or cashier’s check. Once the final numbers are calculated, the various payments go to the necessary places and the seller will get a check for any leftover money that was not needed to complete the sale.
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