Are There Closing Costs if You Pay Cash for a House? Yes!

Buying a home with cash can feel like achieving a significant financial milestone. The absence of mortgage payments, the speed of closing, and the strong appeal to sellers are undeniable benefits. Many cash buyers assume that by sidestepping a home loan, they also bypass the complex array of fees associated with closing. However, this is a common misconception.The truth is, even when you pay cash for a house, closing costs are a fundamental part of the transaction. Understanding these expenses thoroughly is crucial for any cash buyer to budget accurately and avoid unwelcome surprises.

At Redfin, we’re all about giving homebuyers the transparency and insights you need to confidently navigate the real estate market. It doesn’t matter if you’re getting a mortgage for your place in Austin, TX, or making an all-cash offer on a townhouse in Charlotte, NC — knowing all the transaction costs upfront is super important. So, let’s dive into the specific closing costs you can expect when paying cash for a home, and how Redfin can help make that financial journey a little clearer for you.

The undeniable appeal of a cash offer in today’s market

A cash offer really stands out in competitive housing markets. Sellers often prefer cash buyers because there’s less risk of a loan falling through, and the whole closing process can happen much faster. This can give you a real edge, potentially helping you secure a property even when others are putting in higher offers that rely on financing. 

Plus, getting to bypass lender-required appraisals and certain loan underwriting steps can shave weeks off the closing timeline, making the entire transaction smoother for everyone involved. In fact, a recent Redfin report shows that just under one-third of U.S. home purchases were made in cash in 2024.

Thinking of selling?

Lock in a competitive rate for your next home.

Surprise! What you’ll actually pay as a cash buyer

While paying cash eliminates loan origination fees, appraisal fees (if not for your own due diligence), and other lender-specific charges, a range of other essential costs remain. These are not tied to a mortgage but are inherent to transferring property ownership.

Essential closing costs beyond the purchase price

Even without a lender, you’ll encounter several categories of closing costs. These are typically paid at the closing table and cover the administrative and legal aspects of the transaction:

• Title search and title insurance: Before you can legally own a property, a title company conducts a thorough title search to ensure there are no existing liens, claims, or encumbrances on the property’s title. This step is critical to confirm the seller has the legal right to transfer ownership. Following the search, title insurance protects you, the buyer, from any future claims against your ownership that might arise from issues missed during the title search. This is a vital safeguard for your investment.
• Escrow fees: In many transactions, an escrow agent holds all funds and documents related to the sale until all conditions are met. These fees compensate the escrow company for managing the exchange of money and documents, ensuring a fair and secure transaction for both buyer and seller.
• Real estate transfer taxes: These are taxes levied by the state, county, or municipality on the transfer of real property from one owner to another. The amount varies significantly by location and is often calculated as a percentage of the sales price.
• Recording fees: After the sale is finalized, the deed and other necessary documents must be officially recorded with the local government (typically the county recorder’s office). Recording fees cover the cost of formally documenting the change of ownership in public records.
• Attorney fees (where applicable): In some states, it is legally required or highly recommended to have an attorney oversee the closing process. They ensure all legal documents are correct, advise on any potential issues, and represent your interests at the closing table.
• Home inspection fees: While not strictly a “closing cost” in the legal sense, a home inspection is a non-negotiable expense for any prudent buyer, especially a cash buyer. Without a lender to require one, it falls entirely on you to ensure the property is sound. A professional inspection can uncover hidden defects that could lead to costly repairs down the line, saving you significant money and stress.
• Surveys (if necessary): In some cases, a land survey may be required to confirm property boundaries, easements, or encroachments. This is particularly relevant for properties with unclear boundaries or those in rural areas.

How much are closing costs on a cash offer?

Even if you pay cash for a house, you’ll still have closing costs. These are typically not loan-related fees, but rather fees associated with the transfer of property ownership itself. While traditional home purchases with a mortgage typically incur closing costs between 2% and 5% of the home’s price, a cash offer generally reduces this range, with cash buyers usually paying around 1% to 3% of the purchase price, though specific circumstances and location can still influence the final amount. Here’s a simple example:

Let’s say you’re buying a home for $400,000 with a cash offer.

Your closing costs could look something like this:

• Title search & title insurance: $1,500 – $3,000 (protects against claims on the property’s ownership)
• Escrow fees: $800 – $1,600 (for the neutral third party managing the transaction)
• Real estate transfer taxes: $1,000 – $4,000 (varies greatly by state/county)
• Recording fees: $100 – $300 (to officially register the new ownership)
• Attorney fees (if applicable/desired): $500 – $1,500
• Home inspection fee: $300 – $600 (highly recommended for due diligence, even if not required by a lender)
• Prorated property taxes: This varies depending on when you close in the tax year, but you’ll owe your share from the closing date to the end of the current tax period. Let’s estimate $1,000 for a prorated amount.

Adding these up, your estimated closing costs could range from roughly $5,200 to $11,000 for a $400,000 cash purchase. This falls within the 1-3% range mentioned above ($4,000 to $12,000 for a $400,000 home).

Remember, this is a simplified example. Actual costs will depend on your specific location, the property’s value, and the service providers you choose.

Ongoing financial commitments of homeownership

Beyond the initial closing costs, there are recurring expenses that are part of property ownership. These aren’t closing costs but are important to factor into your overall budget when purchasing with cash:

• Property taxes: These are annually assessed taxes by local government entities (county, city, school district) based on the property’s assessed value. They are used to fund local services like schools, police, and infrastructure. Even as a cash buyer, you’ll be responsible for these ongoing taxes.
• Homeowners’ insurance: Protecting your investment from unforeseen events like fire, theft, or natural disasters is paramount. While not mandated by a lender for cash purchases, securing adequate homeowners insurance is a fundamental aspect of responsible homeownership.
• Home maintenance and repairs: Every home requires ongoing care, from routine upkeep to unexpected repairs. Budgeting for maintenance is a crucial aspect of long-term homeownership.
• Homeowners association (HOA) fees: If the property is part of a planned community, condominium, or townhouse development, you will likely be subject to monthly or annual HOA fees. These fees cover the maintenance of common areas, amenities, and sometimes external structural upkeep.
• Utilities: Don’t forget the recurring costs for electricity, water, gas, internet, and other services necessary for daily living.

Smart strategies for estimating your cash purchase expenses

Accurately estimating these costs is vital for a smooth transaction. You want to ensure you have sufficient funds not just for the purchase price but for all associated expenses.

Leveraging Redfin’s platform and expertise

Redfin offers valuable tools and services that can assist cash buyers in understanding and estimating their total costs:

• Redfin partner agents: When you work with a Redfin Partner Agent, you gain access to local market expertise. These agents can provide insights into typical closing costs in your specific area, connect you with reputable title companies, and help you navigate the negotiation process with clarity.
• Redfin estimate: While primarily a valuation tool, the Redfin Estimate on a property’s detail page can give you a baseline understanding of a home’s value, which in turn influences property tax assessments and insurance premium estimates.
• Property detail pages: On Redfin.com, specific property listings often include estimates for annual property taxes and, if applicable, HOA fees. These figures can help you factor in your ongoing ownership costs from the very beginning of your search.
• Transaction transparency: Redfin aims to provide transparency throughout the home-buying process. Our agents and support teams can help demystify the various fees and charges, ensuring you understand each line item.

Complementary estimation approaches

Beyond Redfin’s resources, consider these additional methods to refine your cost estimates:

• Request an estimate from the title company: Once you have a property under contract, the title company handling the transaction can provide a detailed breakdown of the expected closing costs. This is often the most accurate estimate you’ll receive.
• Consult with a real estate agent: Your Redfin agent or another trusted real estate professional can provide general estimates based on their experience with local transactions.
• Review the purchase agreement: The purchase agreement outlines who is responsible for which closing costs, as these can sometimes be negotiated between buyer and seller.
• Budget 1-3% of the purchase price: While a rough guideline, cash buyers should typically budget between 1% and 3% of the home’s purchase price for closing costs. This can vary significantly by location and specific transaction details, so it’s a starting point, not a definitive figure.

Deciding if a cash home purchase fits your financial plan

Paying cash for a home offers numerous advantages, from stronger offers to faster closings. However, it’s essential to weigh these benefits against the significant capital outlay. Tying up a substantial amount of cash in a single asset might limit your liquidity or prevent you from pursuing other investment opportunities.

Redfin’s comprehensive data and agent insights can help you evaluate if a cash offer aligns with your broader financial goals. We provide tools to explore comparable properties and understand market trends, assisting you in making a well-informed decision about your most valuable investment.

Making an informed cash purchase 

So, the answer to “Are there closing costs if you pay cash for a house?” is a definite yes. While paying cash simplifies the financing side of things, it doesn’t get rid of the core costs that come with transferring property ownership or the ongoing responsibilities of owning a home.

Being fully prepared for all these expenses ensures a smoother transaction and sets you up for a financially sound homeownership experience.

If you want to know more about the homebuying process, this Redfin article is for you.

Gain expert insights, essential tips, and the confidence to navigate the real estate market like a pro with Redfin’s Homebuying Guide.