Apr 11, 2023
Buying a house with cash will make you feel like a million bucks. Maybe you came into a large inheritance, or you’re just really good at saving. Either way, paying the price of the home in full means you won’t have to worry about making mortgage payments. Plus, sellers love a cash offer because it means they won’t have to wait for mortgage lenders to approve your funding. High-fives all around!
You will, however, still be responsible for closing costs when paying cash. Don’t forget about these expenses you’ll have to cover, even if you plan on financing the house with cold, hard cash. Here’s what to know about closing costs for cash buyers.
How much are closing costs on a cash deal?
The purchase price is the biggest number you’ll have to face when buying a house, but there are still closing costs that must be dealt with, says Realtor® Denise Shur with 1:1 Realty in San Jose, CA. Sure, you won’t have those loan-related fees, but there are a grab bag of others:
- Real estate transfer taxes charged by the county and/or city
- Title insurance fee
- Processing and filing fees for forms being submitted to the County Recorder
- Appraisal fee
- Home inspection fee
Even if you’re buying a home with cash, the one-time closing costs, or fees you’ll have to pay during the closing process, can be as much as 3% of the purchase price, according to Lee Dworshak, a Realtor with Keller Williams LA Harbor Realty.
And even though you’ve paid for your home in cash and paid all closing costs, that doesn’t mean you can get away with living for free in the years to come.
Even though your residence is “paid off,” there are costs you’ll incur down the line. Here are some ongoing costs you should be prepared for—by keeping some money in the kitty.
Five additional costs cash buyers must be aware of:
1. Property taxes are part of the deal
Yep, they say the only things certain in life are death and you-know-what. And it’s true! Even if your house is entirely paid off, you’ll still have to pay property taxes each month.
To get an idea of what those bills will look like, check a home’s listing on realtor.com®. Scroll down to the Payment Calculator section, and look on the line that says Property Tax.
To get a more definitive picture, visit your city and county websites to find out the local property tax rates and whether a hike is imminent. You can also check with your real estate agent to get a copy of the current owner’s tax bill.
2. Homeowners insurance adds up
The cost of your homeowners insurance policy will depend on the size and value of your home, your location, your deductible, and your coverage.
Talk to your current insurer about the home and area you’ll be moving to to get an accurate picture of your new insurance costs. You might need to add flood or earthquake coverage to your policy if those are real threats in your new neighborhood.
3. Buying a house with cash doesn’t absolve you of home maintenance
We hate to break it to you, but things break. That’s why savvy homeowners put aside some money each month for unexpected repair or maintenance needs. Shur recommends considering a home warranty, which costs about $450 a year and provides coverage on a wide variety of elements such as plumbing, electrical, heating/air conditioning, and appliances.
4. Homeowners association fees
If you’re buying a house with cash in a community with a homeowners association, you might have to budget for monthly or annual HOA fees. These mandatory fees are paid by everyone who owns in the community and go toward maintaining the common areas.
These fees will be based on the size of your home and the amenities in your community, but for a typical single-family home, HOA fees can cost around $200 to $300 a month.
5. Utilities are forever
Don’t forget to factor in utilities such as electric, gas, water, sewer, and trash. To get a clear picture of what you’ll be required to pay, ask your real estate agent to ask the sellers what a year’s worth of bills costs. Utilities can fluctuate from season to season, so this is especially important if you’re moving across the country to a new climate.