Closing costs are assumed to be part of doing business in real estate, but do cash buyers pay closing costs? Yes, you can expect charges for attorney hours, taxes, and title fees to still apply, though the use of cash can greatly reduce a buyer’s closing costs with the elimination of mortgage fees.
Sellers may also get a break on closing costs when they accept an all-cash offer, though it depends on who the offer comes from and how the deal came together. Investors paying cash are often willing to help cover a seller’s closing costs, knowing that a seller facing financial hardship doesn’t always have the funds to do so.
In addition, many cash sales happen directly between seller and buyer, removing the average 3%-5.8% agent commission fee from the seller’s balance sheet.
Closing costs: Financed vs. cash buyers
After several years of renting, saving for a down payment, and dreaming of backyard bliss, an aspiring homeowner decides it’s finally the right time to buy. First, they’ll probably need a mortgage! When you sell a house, this is the type of buyer you’re most likely to encounter, considering 74% of recent buyers financed their purchase.
Buyer closing costs
When buyers purchase a home using a mortgage, they’ll incur costs related to originating and processing that loan. These fees alone are usually 1%-2% of the loan amount but can go as high as 3% on top of attorney fees, title fees, and any additional settlement costs to purchase the home. Overall, buyer closing costs usually amount to 2%-5% of the home’s price.
Seller closing costs
Sellers then have their own set of closing costs to pay, the biggest of which is agent commissions totaling 3%-6% of the transaction cost. This commission range includes the listing agent’s fee of around 3% and the buyer’s agent’s fee — if the seller offers or the buyer negotiates for the seller to cover it.
Sellers may also chip in for transfer taxes, title fees (it’s common in some states for the seller to pay the buyer’s title insurance, while the buyer covers the lender’s title insurance), settlement fees, and incentives like a home warranty.
Cash buyer closing costs example
The closing fees in all-cash real estate transactions are generally much lower. Here’s an example of a settlement statement for a transaction between a local house-buying company in Huntsville, Alabama, and a seller in the area (with sensitive details redacted).
The seller paid nothing in closing fees in this example, while the buyer paid just under $1,500 in closing costs:
- settlement fees of $400
- title search fee of $200
- document preparation of $225
- owner’s title insurance of $566
- government recording fee of $28.25
- state tax of $14.
These fees, among others, were eliminated:
While this example gives you an idea of how cash buyer closing costs can shake out, it doesn’t represent every sale. Yours may be different depending on factors like your home’s value, your market, and the buyer you sell to.
We also know that a low-cost sale can be very appealing to some sellers! If you’re interested in selling to a cash buyer, try HomeLight’s Simple Sale platform. With Simple Sale, HomeLight provides cash offers for homes nationwide in almost any condition. Skip the repairs, staging, showing, and prep work — and go straight to receiving a full cash offer.
To get started, tell us a few details about your home, and we’ll provide you with a cash offer within 48 hours. The program offers no hidden fees or agent commission costs, and the ability to close in as few as 10 days.
