Do You Pay Closing Costs When You Buy a Home in Cash?

by Phil Altshuler ; Updated July 27, 2017

It is possible to buy a home for cash without paying any closing costs. Your seller can sign a deed and have his signature notarized, and you can record the deed at the county recorder's office. This is not a smart thing to do. The seller could have a mortgage, tax liens, homeowner's association lien or any number of other obligations or restrictions on title.

Closing Costs

Closing costs consist of any costs related to taking title to a property. Normal costs are loan processing, underwriting, document fees, loan origination fee, recording fees and escrow and title fees. If you purchase a home with cash, you should have an escrow company handle the transaction for your protection. You will still have escrow, title and recording fees but the relatively small costs involved will ensure that your home will have a clear title.

Cash or Mortgage

If you have the funds available, you have a choice of financing the purchase or paying cash. This is a decision you should review with a financial adviser or attorney. A mortgage is typically your largest tax deduction, if you itemize deductions. If you would still use a standard deduction after you obtain a mortgage, there would be no tax advantage. Paying cash would give you the security of not having a monthly mortgage payment.

Advantages

If you purchase a property with a small down payment, you have the advantage of leveraging your money when property values are appreciating. If property values are stagnant or depreciating, you do not have an advantage. If you pay cash for your property, you do not have an interest expense from a mortgage. There are advantages and disadvantages either way. Purchasing a home is probably going to be your single largest investment. Think carefully before deciding whether to finance or pay cash.

Considerations

The 2011 financial market seems to indicate that properties will not be appreciating in the short term. This does not mean that a real estate investment is a bad move. If you are buying a home to live in, you should consider whether you expect to live in the home for many years. One thing is sure. The real estate market will have its difficulties but overall it will eventually trend upward.

About the Author

Phil Altshuler has written award-winning ad copy and sales-training literature since 1965. He is an expert in conventional and sub-prime loans, bankruptcy, mortgage loan modifications and credit. Altshuler was a licensed mortgage broker in California and Arizona, as well as a licensed electrical contractor. He has a Bachelor of Science in electronic engineering from California Polytechnic State University.