When you buy a piece of residential real estate, you will typically be the one paying the closing costs. You have to make deposits into an escrow account for taxes and insurance. You have to pay the fees associated with loan origination and the actual appointment to sign the paperwork.
As you go over the documents outlining how much you need to bring to the table for closing, you may notice certain costs that you could potentially eliminate. While many closing costs are non-negotiable, some of them are charges incurred at your discretion.
What two costs can use sometimes eliminate when buying real estate?
The inspection costs
If you purchase a property with cash, meaning there is no lender involved, you may have the option of waiving the inspection. Doing so became quite popular in the last few years when buyers had to compete with one another to have an offer accepted on a property.
Although you can sometimes bypass the inspection with minimal risk, such as when you buy property from a family member and know the details of how they used and maintained the property, or going professional inspection can be a risk.
Even when you tour the property with a real estate professional, you could potentially miss latent defects that a professional would spot. The few hundred dollars you save by eliminating the inspection might put you at risk of significantly overpaying for the property.
The buyer’s title policy
When you have a lender funding the purchase, their title policy is a requirement. They require title insurance to protect them from the financial losses possible if there were a successful title claim brought against the home.
However, you may have the option of canceling your own title insurance policy, a move that could significantly reduce your closing costs. If you don’t have title coverage for yourself, there is the very rare but real potential of someone bringing a claim against the property in the future. Without a title policy protecting your investment, every cent you have paid toward the home would disappear after a successful title claim brought by someone else.
Understanding what closing costs you can eliminate and why many people choose not to can help you better protect yourself when you prepare for a residential real estate purchase.