Are There Closing Costs When Buying a Home With All Cash?
Buying a home with all cash is certainly an accomplishment, and there’s nothing like the secure feeling of owning your own home free and clear. In today’s volatile Madison Wisconsin home sales market, a number of buyers are skipping the mortgage application process and making all cash offers on home purchases. Of course this makes their offers much more attractive to the sellers, who know that cash buyers are in a position to close a deal quickly. But speaking of closing, how does that pan out? Are there any closing costs when a home buyer is paying all cash? The answer is: yes and no. There will still be certain closing costs to pay – although you will avoid some closing costs entirely, while others will be reduced.
Closing Costs You Won’t Have to Pay
Many of the traditional closing costs stem from the home loan process. As an all cash buyer you will avoid the expense of the mortgage application itself, as well as assorted loan origination fees, and the bank attorney. You won’t be required to pay for an appraisal for the bank, although many realtors skilled at Madison home sales recommend that you have one done anyway, to make sure you aren’t paying more than the house is worth. The cost of title insurance will drop by about a third, which is the portion that normally protects the bank’s interest.
Other Closing Costs
The remaining closing costs are not mortgage related. They include title insurance (minus approximately one third), escrow fees and transfer taxes. In the case of a condo, you’ll also have HOA transfer fees. However, there’s a saying in the real estate business: cash is king. Home sellers love the simplicity and security of all cash deals. Because of this, you may well persuade the seller to cover these closing costs as part of the negotiations. All you will have left to pay are the annual property taxes, prorated according to the date you take possession, and recording fees.
Additional Advantages to Buying with All Cash
As well as your savings on closing costs, there are additional advantages to buying a home with all cash. You may get a price discount from a homeowner who is eager to sell fast. You bypass the complicated and lengthy process of applying for a home loan. This is especially important if you are less likely to qualify for a mortgage – as a retiree, a non-American citizen, a real estate investor or a person with a shaky credit history. You have a great chance of beating the competition to buy Madison foreclosures, if there are multiple offers. And you’ll have no restrictions on title transfer in the future.