How to Calculate Closing Costs in Virginia

What are Closing Costs?

Closing costs are necessary expenses when finalizing the sale of your property. These costs include title search, insurance fees, property and transfer taxes, escrow fees, lawyer fees, HOA dues, recording fees, and utility bills. As the seller, you’ll be responsible for most of the closing fees. That doesn’t mean the buyer doesn’t have closing costs too, as they must pay loan origination fees and mortgage insurance.

There are also other expenses that are not technically closing costs, like seller concessions and real estate professional commissions. Since they’re paid at the close of the transaction, we’ll cover them too.

Title Insurance Fees

The main requirement when selling homes is that they need to have a free and clear title. This indicates that you are the rightful and legal owner of the house. This is when title insurance becomes necessary. 

It protects you from undiscovered liens that could cause the sale to fall through because of ownership conflicts. According to Fannie Mae, title services typically cost 0.42% of the sales price.

Property Tax

In Virginia, property taxes are handled locally, and your city, county, or municipal government is responsible for administering them. The rates can vary significantly: from 0.403% in Prince Edward to 1.136% in Manassas Park, and the state average is 0.671%. That said, this is still lower than the national median of 1.03%, which is attractive for buyers seeking to move from out of state.

Transfer Tax

Transfer tax is charged every time a property changes ownership. The state tax ($0.25 per $100 of fair market value) and the city or county tax ($0.083 per $100) are shouldered by the buyer, while you’re responsible for the seller’s tax, which is $0.50 per $500 of the sale price. Unlike the property tax above, all transfer tax rates are set by state law, though a portion of the recordation fees goes to the city or county. 

Escrow Fees

An Escrow company is a neutral third party that handles the financial aspect of the home sale process. These include the earnest money deposit, down payment, property taxes, and title insurance; they ensure that every party gets what is due to them at the conclusion of the transaction. Neither you nor the buyer controls the escrow account. This also means that the fees are split between the two of you.

Most Virginia escrow companies charge a flat fee of up to $500 for each party, and then an additional $1-$2 for every $1,000 of the selling price; some charge 1-2% of the total price to simplify things. 

Recording Fees

Your city or county will charge this fee in order to legally record the sale. This varies by location, but expect to pay a bit over $200. In some instances, the buyer may cover this.

HOA Dues and Utility Bills

Virginia homeowners pay an average of $325 per month in HOA fees, one of the highest across the United States. As for utilities, which include electricity, heating, internet, and water, they average $387. You’ll be responsible for these expenses up until you finalize the sale of your home.

Need to sell your home for cash in Virginia quickly? We provide fair offers and smooth closings.

Optional Seller Expenses in Virginia

Seller Concessions

If your house has items that need fixing, especially if it’s older, you can either fix them yourself or offer repair credits to the buyer. The cost depends on the extent of the damage. For example, if there are foundation issues, it could easily run up to $8,000. Since this is costly and stressful, you might consider offering it as a discount to the buyer.

Estimated cost: $5000-$30,000+ for majorstructural issues

Upgrades

Sometimes a renovation is necessary to help attract top-dollar offers. If you’re going this route, focus on upgrades that have a high return on investment, such as:

• Finished basement: This costs $32,000 on average, but can add $40,000 to $50,000 to your asking price. That nets you $8,000-$18,000!
• Garage door replacement: spending $4,500 on upgrading your garage door can pay you back almost triple in the value that it adds to your home.
• Interior repainting: warm, earthy tones give a cozy and comfortable vibe to any home. If you’re contemplating this upgrade, it’s worth it. Not only does it deliver a 107% return, but it can also maximize interest from prospective buyers!

Realtor Commissions

Real estate professionals take on the hassles and stresses associated with a home sale. They stage the home, host open houses, evaluate offers, negotiate with the buyer, and sort out the paperwork at closing. Of course, you need to pay their commission. 

Estimated cost: 5.50% of the listing price

Property Appraisal Fee

To set a competitive list price, why not let a professional determine the value? A home appraiser evaluates the condition of the property, location, features, and real-time local market trends to provide a valuation.

Estimated cost: $314-$424

Home Inspection Fee

Virginia is a “caveat emptor” state, which means that the discovery of possible property issues is on the buyer. However, sellers are still required under Virginia law to provide a Residential Property Disclosure Statement for certain known issues, such as septic systems and pre-1978 lead-based paint. Additionally, you can expect the buyer to bring in their own home inspector before you both head to closing, as lenders will refuse to finance them without an inspection report.

As a seller, you can also request your own inspection. This way, you get ahead of possible issues that may be discovered anyway. If your house has a clean bill of health, you can market it as such and ask a higher price.

Estimated cost: $300-$400

Virginia Closing Cost Calculator

The sale price of your home is the starting point when obtaining estimates for how much you’re ultimately going to get from the sale. Then, deduct the closing costs, mortgage plus interest, liens, commissions, and any other seller concessions that you have made during the final negotiation. Any cash left over is yours to keep. 

Set your Selling Price

Determining your asking price requires a delicate balance. You don’t want to set it so low that you’re forced to accept lowball offers, and you don’t want to set it so high that buyers are turned off before even seeing the property. To be successful in this crucial step, do the following:

• Look at “comps”: “Comps”, which is short for comparable properties, refer to nearby similar properties that have been recently sold. You can easily check this by going online and looking at listings, or take a walk around your Virginia neighborhood, and look for properties with ‘For Sale’ signs out front.
• Use an online valuation tool: There are plenty of tools available online, where you’ll enter details about your property, and it’ll automatically give you an estimated market value.
• Hire an appraiser: For a professional valuation, you can hire an appraiser to give you an accurate price point.

Calculate your Mortgage Payoff Amount

Request the latest payoff statement from your lender. This document provides information on how much equity you’ve built up, how much balance remains, and other fees that your lender may charge, like an early payment penalty. When setting your selling price, make sure that you’ll have enough to cover your mortgage balance.

Determine your Agent’s Commission

While the average realtor commission in Virginia stands at 5.50%, you have to remember that this number isn’t set in stone. Try to negotiate for a lower rate. Usually, in a seller’s market where the inventory flies off the shelf (figuratively), they may be open to reducing their fee.

Estimate Other Selling Costs

Virginia closing costs typically include title search and insurance fees, property and transfer taxes, escrow fees, lawyer fees, recording fees, HOA dues, and utility bills. Other costs associated with the sale, such as repairs, inspections, appraisals, and upgrades, are at your discretion. 

Frequently Asked Questions: Calculating VA Closing Cost

Who Pays the Closing Costs: Buyer or Seller?

Sellers and buyers each have their own closing costs to pay.

Buyer closing costs include:

• Loan origination fee
• Mortgage insurance
• Escrow fee share
• State transfer tax
• Homeowner’s insurance

Seller closing costs include:

• Title search and insurance fees
• Property tax 
• Seller’s transfer tax
• Escrow fees
• Lawyer fees
• Recording fees
• HOA dues
• Utility bills

Most buyers are open to negotiating who pays which fee. 

When Do I Need to Pay the Closing Costs?

Closing costs are due on closing day, when you and the buyer sign the paperwork. Some buyers opt to roll the closing fees into their mortgage (if they’re financed), which results in a higher monthly mortgage payment. 

What if my buyer is using a VA loan?

Virginia has a high volume of buyers financing their homes with a VA mortgage loan, especially in Northern Virginia and Hampton Roads, given the heavy military presence. VA loan rates are also lower than conventional loan rates. If your buyer is a veteran or an active service member, there are a few closing-cost details worth knowing about.

There is a VA funding fee, which is a one-time charge paid by the buyer to the Department of Veterans Affairs. This is typically 1.25% to 3.3% of the loan amount, depending on down payment and whether it’s a first-time VA loan. The funding fees are usually rolled into the loan, so it doesn’t affect your proceeds directly. What can affect your sale is that the Department of Veterans Affairs prohibits buyers from paying certain fees, such as termite inspection. The buyer may ask you to cover these non-allowable items as a concession.

How Can I Save on Closing Costs?

Being proactive can lead to big savings. Below are some tips to drive down closing costs and keep more of the sale proceeds:

• Negotiate with the buyer

Knowing whether you’re in a buyer’s or seller’s market can make a world of difference. If you’re in a seller’s market, with a lack of inventory and high buyer interest, you can easily leverage this to your advantage. On the other hand, the opposite holds true in a buyer’s market. 

• Shop for favorable rates

Don’t stick with the first company to give you a quote. Reach out to multiple companies, gather quotes, and evaluate offers that would give the most bang for your buck. Typically, local Virginia companies can provide better prices.

• Save on real estate professional commissions

Although real estate fees aren’t closing fees necessarily, we’re including them here as they take a huge chunk out of what you profit. What if we tell you it’s possible to take this out entirely? By selling to cash buyers like us here at Cash For Houses Girl, you skip the middleman and the fees along with it!