Are you an all-cash buyer? There are benefits to paying with cash, such as a shorter escrow period, lower escrow fees, and an advantage in negotiations.
Here is a list of closing costs specific to cash buyers, along with an example of what it would cost to buy a $500,000 house with cash.
NOTE: These costs apply to California sales. If you are buying a home outside of California, these numbers probably don’t apply. Check with a local real estate company for your closing costs.
The answer is a resounding yes! Even when you pay cash for a house, there are still closing costs that you’ll need to pay However, these costs are typically much lower than the closing costs associated with a traditional mortgage
What are closing costs?
Closing costs are fees that are paid at the closing of a real estate transaction. These fees cover a variety of expenses, including:
- Title search and insurance: This ensures that the seller has clear title to the property and protects you from any hidden liens or encumbrances.
- Escrow fees: The escrow company handles the paperwork and funds associated with the closing.
- Transfer taxes: These are taxes that are levied by the government on the transfer of property.
- Attorney fees: In some states, you may need to hire an attorney to review the closing documents.
- Homeowners insurance: You’ll typically need to pay the first year’s premium for homeowners insurance at closing.
- HOA fees: If you’re buying a house in a neighborhood with a homeowners association (HOA), you may have to pay a transfer fee to the HOA.
How much are closing costs for a cash buyer?
The purchase price of the house, its location, and other elements will all affect how much closing costs you have to pay. Nevertheless, as a general rule of thumb, you can anticipate paying roughly 3% of the purchase price in closing expenses.
For instance, you should budget about $15,000 for closing costs if you’re purchasing a $500,000 home with cash.
How can I reduce my closing costs?
There are a few things you can do to reduce your closing costs:
- Shop around for title insurance: Get quotes from several different title insurance companies to make sure you’re getting the best rate.
- Negotiate with the seller: You may be able to negotiate with the seller to pay some or all of your closing costs.
- Use a discount lender: Some lenders offer discounts on closing costs if you use them for your mortgage.
Even though you’ll have to pay some closing costs, buying a house with cash can still save you a lot of money compared to financing the purchase with a mortgage. You’ll avoid paying interest on the loan, and you’ll also be able to close on the house more quickly.
If you’re considering buying a house with cash, be sure to factor in the closing costs when you’re budgeting for the purchase. You should also talk to a real estate agent or mortgage lender to get a more accurate estimate of how much you’ll need to pay.
Non-Recurring Closing Costs for Cash Buyers
All buyers have to pay escrow fees. In a real estate transaction, the escrow officer oversees all financial transactions and makes sure that all outstanding debts are settled. The escrow fee varies from company to company, but averages $200 base plus $2 per $1,000 purchase price. You must pay additional loan document fees, loan tie-in fees, and notary signing fees when you purchase with a mortgage. Cash buyers avoid those fees. Courier, HOA policy transfer, and other services offered during the escrow may incur additional costs for all buyers.
Buyers usually have to purchase a title insurance policy for their lender. Paying cash means no title insurance to buy. You won’t have to pay for a lender policy; however, the seller will cover the cost of your owner’s policy (learn more about seller disclosures). Additionally, when your lender funds your purchase, you are not required to pay endorsement fees or wire fees. You still have to pay the county recording fee for the grant deed as one title fee.
Closing Costs for Cash Buyers: Up-Front Costs
If you are a cash buyer, you will likely want to pay for a home inspection as well as submit an Earnest Money Deposit as soon as escrow is opened. You are not required to pay for a Loan Appraisal. Sometimes, cash buyers will ask for an appraisal and guarantee to only pay the appraised value of the property.
You will have to give the escrow officer an Earnest Money Deposit (EMD) as soon as the seller accepts your offer to purchase a house. This demonstrates your seriousness as a buyer—you have the funds and are determined to purchase this home. You specify the EMD amount in your original offer to the seller. The escrow company is holding these funds, which you will use for your down payment and other closing costs. The EMD may be fully refundable if you change your mind about buying the property. Please check with your real estate agent regarding the refundability of your EMD.
As soon as you open escrow, you can hire a home inspector to check the property. The home inspection fee depends on the size and type of property, and the inspector you choose. Most home inspections cost between $250-$750. Your home inspector may recommend further inspections, such as for the roof or sewer system. Read more about Home Inspections.
CASH BUYER CLOSING COSTS|Buying a home using cash? Here are a few basic fees you should expect!
FAQ
How much less should you offer on a house when paying cash?
Are closing costs included in cash to close?
Why is a cash offer better for a seller?