Making a cash offer on a house is becoming more and more popular.
In 2022, about 36% of single-family homes in the United States were bought via cash offers. To put this in perspective, only 23% of these homes were bought with cash offers in 2020.
Selling a home for cash may be a dream come true for a seller. This means that they can expedite the selling process and do not have to worry about buyers getting approved for a mortgage loan.
However, just because this may be a smoother process does not mean that it is going to be free. Sellers still have costs to pay for selling their home even if they accept a cash offer on their home.
What are the main costs that you have to consider? How much money is this going to cost a seller?
This guide will answer those questions and more.
Real Estate Agents
The main cost you will have to worry about as a seller is one where you hire a real estate agent. That is because real estate agents work on a commission. So, you are going to have to give the real estate agent a percentage of the money that you get from your home sale.
On top of this, the real estate agent that sells your home typically splits this commission with the real estate agent that works with your buyer.
How much does this add up to? The answer is it depends on how much your home sells for.
Let’s say that your home sells for $500,000. A real estate agent may ask you for 5% of that as their commission. So, you would end up paying them about $25,000 from the money you get from the sale.
In all likelihood, you are going to end up working with a real estate agent to sell your home. About 86% of all home sales in the United States are done by real estate agents.
If you want to avoid paying this commission, you do have the option of going the for sale by owner (FSBO) route. However, the catch here is that you have to do all of the paperwork for the sale yourself in some states on top of doing all of the negotiating.
For a lot of people, this is either not worth the headache or some of the information goes above their heads. If you are like most of America and hire a real estate agent for your home sale, prepare to cough up some of the money that you receive from this home sale to the real estate agents.
Something else that you may have to pay for is attorney fees. This one may depend on what state your house resides in.
Some states require that an attorney be present when you are closing a home sale. Attorneys are good at handling all of the paperwork required for a sale on top of letting the buyer and seller know if everything in the transaction is legal.
If you are thinking about selling your home, do some research and see if you live in a state that requires an attorney for real estate sales. If you do live in that state, be prepared to pay some money for an attorney.
One thing you have to think about when you are trying to sell your home is if you have any mortgage payments remaining on your current house. If you do have any money left to pay on your mortgage loan, be prepared to set some money aside to pay that balance off.
Typically, mortgage loans are given out in either 15-year or 30-year terms. So, it is conceivable that somebody may want to sell their home before that time expires. This is perfectly acceptable; however, you have to remember that you are still responsible for paying off the remaining principal of your mortgage.
Considering that the median mortgage monthly payment is over $1,000 in the United States, you could end up paying a significant amount here if you are trying to sell your home early enough into a mortgage.
Sit down and figure out what the remaining principal on your current mortgage is. Then, factor this in when you are getting ready to make your next move to another home.
Buyers are going to want to do their due diligence on a property that they are considering purchasing. One way to do this is to have a title company get involved and do a title search.
A title search essentially ensures that there are no issues that would prevent you from making a successful sale of your property. There are two main things that they would be looking for in this situation.
The first thing they would be searching for is any liens you have on your home. This means that you owe somebody money and because you have not paid them back, they are looking at your assets for reimbursement. In cases where there is a larger debt to be paid, that could result in a lien being placed on your home.
Another situation that a title company is looking for in a title search is to see if anybody else would have a rightful claim to your property. This can be anything from a rightful heir, lost will, property line disputes, and more.
Title companies will typically charge a fee that should be a couple of hundred dollars to do this.
Going off of the above, title companies can help protect you in situations where a dispute may suddenly arise. That could be a sudden heir popping up or even a group that claims a last-minute lien on your home.
You want to be protected in these situations, so title insurance could save you here. The catch is that you are going to have to pay a small percentage of your home sale as a fee for this. That is typically less than 1% of the total sale price.
This is when the seller transfers ownership of their house to the buyer. Someone has to process all of this paperwork. As a result, your local ordinance will likely charge you a tax to process this.
How much is this tax? Truthfully, it is going to depend on what state you live in. Look up these details in your state.
These are essentially the fees that you are going to pay the title company for handling all of the paperwork and the funds for your home. This includes exchanging funds between the buyer and seller, noting the deed, taking care of title transfers, and more.
This will typically be about 1% of the sale price of your home, so set some money aside for this.
Depending on how long you resided in your home for your calendar year, you are still going to have to pay some property taxes for that home. How much this costs varies depending on where you live.
Some states like New Jersey charge a high percentage in property taxes. Some cities sometimes have their own property taxes.
If you have been living in that area for a while, you should have some idea of what your property taxes are. Be prepared to pay for whatever portion of the year that you were living in that house.
HOA Transfer Fee
This last cost is very specific for those that live in an area that has a homeowner’s association (HOA). Depending on your area and your specific HOA, you could end up having to pay a transfer fee to the HOA.
This happens because the HOA has to handle all of the documents that come along with transferring ownership of a house that is in their HOA. As a result, they are going to send you the bill.
If you live somewhere that has an HOA, try to get an idea of how much this service will cost you.
Consider a Cash Offer on a House
These are some of the fees that you are going to be expected to pay as a home seller. The biggest one you will likely have to worry about is the real estate agent’s commission. However, you have to prepare for smaller fees such as attorney fees, title fees, escrow fees, and more.
One thing that can make this process easier is accepting a cash offer on a house.
Do you want to know more? Get a cash offer on your home today.