Closing Costs When Buying or Selling a Home in Virginia
Before you sell your Virginia home or get the keys to a new house in this history-filled state, you’ll need to understand your share of closing costs. These fees and expenses associated with buying or selling a home can stretch well into the thousands or beyond. In a state where the median price of a home exceeds the national median, they can add up to a very significant chunk of change.
The bulk of closing costs are related to the mortgage loan, which means buyers typically foot most of the bill. But sellers aren’t off the hook. Read on to learn how much closing costs run in Virginia, and who pays for what.
How much are closing costs in Virginia?
Closing costs can vary widely by state. According to the most recent ClosingCorp data, costs in Virginia average 1.7 percent of the home’s sale price (not including Realtor fees). That’s right on par with West Virginia’s 1.8 percent, and much lower than neighboring Maryland’s high rate of 3.7 percent.
The amount of closing costs incurred will also vary greatly based on how expensive the house is. Redfin’s July 2023 data shows the median sale price of a Virginia home as $432,300. That’s higher than the national median price of $406,700, and it means that closing costs may be high despite the relatively low rate. For a median-priced $432,300 Virginia home, 1.7 percent means closing costs would come to $7,349.
Of course, in a more expensive area of the state like Arlington, where the median is $739,900, that figure would be higher: $12,578. And in Lynchburg, which has a median of just $259,900, it would come to $4,418.
Who pays closing costs in Virginia, buyers or sellers?
Both buyers and sellers pay some form of closing costs on a home sale in Virginia, as is the case in any state. Both parties will also be on the hook for legal fees if you decide to hire a real estate attorney.
Closing costs for buyers
As a buyer, most of your closing costs will relate to taking out a home loan. (This means your costs will be much lower if you’re able to make an all-cash offer.) Buyers typically cover fees related to both the mortgage and the property itself, including:
Loan application and origination: Many lenders charge fees associated with both applying for and originating the home loan.
Credit report: They might also charge a small fee to check your credit.
Escrow: Your lender might ask you to deposit a set amount of prepaid property taxes and/or home insurance premiums into an escrow account. You may have to pay a maintenance fee on the account as well.
Title insurance and search: Who pays for title-related fees can vary from state to state, and in Virginia, it’s typically the buyer. A title search ensures that there are no issues that will hinder the transfer of ownership, and title insurance protects against problems with the title, like liens or encumbrances.
Mortgage points: You might be able to buy mortgage points upfront to get a lower interest rate, which can save money in the long run. You’ll typically pay 1 percent of the loan amount for each point, which will lower the rate by 0.25 percent.
Appraisal: Your lender will require a professional home appraisal to establish that the home is worth at least the amount it’s lending you. The fee varies but typically runs a few hundred dollars.
Home inspection: While home inspections aren’t required, it’s smart to get one anyway to identify major problems, or small ones that could progress over time. You might even be able to use the results to negotiate the cost of repairs.
Transfer tax: Virginia’s transfer tax, which covers the transfer of property ownership, is complicated. Buyers typically pay recordation fees, also known as “mortgage stamps,” along with other taxes, and sellers pay their own transfer fees as well. Your lender or agent will be able to help you figure out exactly how much you owe.
Closing costs for sellers
Sellers have to hand over a chunk of cash at closing, too. In fact, the seller’s closing cost tab tends to run even higher than the buyer’s, because sellers are responsible for real estate commissions, which run between 5 and 6 percent of the home’s sale price. On a median-priced $432,300 Virginia home, 6 percent is a daunting $25,938. Other seller’s closing costs can include:
Title: The buyer typically pays title-related fees in Virginia, but the seller may be responsible for some as well.
Transfer tax: Virginia’s transfer tax, which covers the transfer of property ownership, is complicated. Buyers typically pay recordation fees, also known as “mortgage stamps,” along with other taxes, and sellers pay their own transfer fees as well. Your lender or agent will be able to help you figure out exactly how much you owe.
Outstanding property taxes and HOA fees: If you owe any property taxes or HOA fees on the closing date, you’ll need to pay up. (For example, if the payments are usually due on the first of the month and you close on the 20th, you’ll owe 20 days worth.)
Concessions: Sometimes, sellers will agree to pay a portion of the buyer’s closing costs in order to hasten the deal. Sellers don’t have to say yes if asked, but it’s very common.
Home warranty: Sellers also sometimes offer to cover the cost of a home warranty, which protects major systems and appliances.
Wire transfers: Your bank will probably charge a small wire transfer fee if you’re transferring funds to pay the balance on your mortgage.
Lowering your closing costs in Virginia
If you’re feeling daunted by all these extra expenses, keep in mind that many closing costs are negotiable. Sellers can typically negotiate their largest expense, the Realtor commission, regardless of market conditions. Buyers could save thousands if they qualify for any number of down payment and closing cost assistance programs. Virginia offers many financial assistance programs for first-time homebuyers in particular, designed to help buyers bear the upfront costs. It also doesn’t hurt to ask your lender if it’s possible to get a discount or have a fee waived.
Find a local real estate agent
No matter if you’re buying or selling in Virginia, hiring a skilled local real estate agent can be the key to a smooth transaction. Ask friends and family for recommendations, especially if they’ve bought or sold recently in your desired market — an agent who knows Washington, D.C. suburbs like Alexandria and Arlington well might not know Virginia beach towns at all, and vice versa. Check websites and online reviews as well, and interview several candidates before selecting an agent.
FAQs
What are the closing costs when buying a home in Virginia?
Closing costs in Virginia typically include fees for services rendered during the home buying process. These may include lender fees, title insurance, appraisal fees, attorney fees, and prepaid items like property taxes and homeowners insurance.
How much are closing costs in Virginia?
Closing costs in Virginia can vary depending on factors such as the home’s purchase price, the lender you choose, and any negotiated seller concessions. On average, closing costs can range from 2% to 5% of the home’s purchase price.
Who typically pays for closing costs in Virginia, the buyer or the seller?
In Virginia, the buyer and seller may negotiate who pays for certain closing costs as part of the purchase agreement. However, it’s common for the buyer to cover most of the closing costs, while the seller may agree to cover certain expenses such as real estate agent commissions or home warranty fees.
Are there any specific closing costs unique to Virginia?
While many closing costs in Virginia are similar to those in other states, there are some unique aspects to consider. For example, Virginia requires a recordation tax on real estate transactions, which is typically based on the sales price of the property. Additionally, Virginia law may require certain inspections or reports that could incur additional costs.
How can I estimate my closing costs when buying a home in Virginia?
You can estimate your closing costs by obtaining a Loan Estimate from your lender, which outlines the expected costs associated with your mortgage. Additionally, your real estate agent or attorney can provide a breakdown of anticipated closing costs based on your specific transaction. Keep in mind that actual closing costs may vary from these estimates.
Conclusion
understanding closing costs is essential for anyone buying or selling a home in Virginia. These costs encompass various fees and expenses incurred during the real estate transaction process, ranging from lender fees to taxes and insurance. By familiarizing themselves with typical closing costs and negotiating responsibilities with the other party, buyers and sellers can better prepare financially and ensure a smoother transition of ownership. Consulting with a knowledgeable real estate agent or attorney can provide valuable guidance tailored to individual circumstances, ultimately facilitating a successful and cost-effective home purchase or sale in Virginia.