You can complete the purchase of a house with cash quickly given the right circumstances. Once the seller verifies your proof of funds, then there are only a couple of major steps to complete before you can close the deal.
Time length varies depending on a variety of factors. In the best of situations, a cash sale can close in 4-10 business days. However, understand that even if a buyer is purchasing a home in true cash, the sale will still need to go through the title insurance and underwriting process. The title process can take anywhere from less than a week to several months – depending on how many issues are found by the title insurance underwriters to be associated with the home. This timeline also assumes no additional liens on the home aside from the mortgage, and that the buyer can move quickly.
Once the inspections are complete, it is time to talk to your attorney to draw up the documents required to close the sale. This is also the stage at which you will hire an escrow company to handle the allocation of funds. If everything goes to plan, this step will take another week.
It is possible to complete a cash purchase in as little as two weeks. If you need a mortgage, on the other hand, it will take at least 30 days to close the deal.
Steps to Buying a Home in Cash:
Negotiations
Both the buyer and the seller will need to negotiate terms of the sale that are acceptable terms to both parties. These negotiations can involve things like the sale price, closing date, earnest money, payment of closing costs, whether there any contingencies of the sale, etc.
Verifying Proof of Funds
A seller should always verify that a cash buyer legitimately has access to the funds needed to purchase the home; this is called “proof of funds.” Proof of funds may be provided by a statement from your bank or brokerage that shows a balance equal to or greater than your offer price should suffice. One suggestion is to create a separate account to hold the funds, and transfer the exact amount of your offer into it.
Signing the Contract
Typically, buying in cash much faster than you can on one involving a mortgage. There is still some paperwork involved, but it’s not unusual to take possession of the house after a couple of weeks.
Opening of Title
A title company is a neutral third party who acts as a “middle-man” of sorts during the sale. The title company’s job is to ensure the property the buyer is purchasing is as described in the sales contract (free of encumbrances or other issues that may affect the property). They also verify that the person selling it has the legal right to do so and that any liens on the property are found and settled at closing. The sale can go as fast (or slow) as the title company can/does.
Delivery of Earnest Money to Title
Earnest money is money put down by the buyer as a promise to follow through with the contract. Cash buyers need to be willing to put their money where their mouth is. 1% of the sales price is the typical amount for earnest money in Texas. If someone isn’t willing to put down 1% in non-refundable earnest money, it’s likely because they’re not sure if they can close on the home. The sale could fall through down the line as a result. If a buyer fails to complete their responsibilities in the contract, the earnest money is usually forfeited to the seller as “damages.”
Inspections
Itis time to make sure there are not any hidden problems with your soon-to-be new home by scheduling an inspection.
Cash buyers will often include an inspection contingency “for informational purposes only” in their offer. When you include an inspection contingency for informational purposes only, you are telling the seller that, no matter what the inspection reveals, you will not ask them to make repairs — though you reserve the right to walk away should the inspection reveal a huge issue. Otherwise, you are willing to purchase the home as is.
Appraisals
An appraisal determines the market value of the home. A state-licensed appraiser performs appraisals. Buyers who plan to purchase the property as owner-occupants may want to have these done; investors like AMI typically don’t.
Closing
Closing is when you sign all the documents required to transfer the home from your name into the buyer’s name. Once the closing paperwork is complete, the title company verifies they have all the needed documents. After verifying that, they transfer the money from the buyer to the seller, pay off any liens on the home, and give the seller any remaining proceeds from the sale via wire or check.
Things That Can Slow the Process Down:
Low Appraisal
If the home is appraised, and the appraisal value is less than the sales price of the home, the buyer may request a reduction in sales price to the appraisal value. While the seller is not obligated to agree to a reduction in the sales price, the sale could fall through if the parties fail to agree on pricing if a home “under-appraises.”
Liens
Each lien on the property has to produce a payoff to the title company for the sale to close. There are intricacies here to obtaining the payouts promptly, such as how the payoff is requested. (Mortgage companies will only snail mail or fax a payoff – fax is always faster.) It is also common for some lien holders (such as HOAs or other liens handled by law firms) to additional charge fees to provide rush payoffs.
Not Being Honest With the Buyer
Be upfront with your buyer if you have additional liens, another person that should be a party to the sale, or you are behind on property taxes. The title company will likely find the issues, and it is best to be honest from the beginning and get them cleared to ensure the fastest sale possible.
Option Periods
The longer the option period, the longer the buyer can back out of the sale without any financial or legal repercussions. To ensure a quick sale, you want no or a short option period, so that if the buyer plans to back out, they make that decision quickly. This way, if the buyer fails to purchase the home for any reason after the option period, their earnest money will compensate you for the failure to close.
Deceased Person Being on Title
When someone deceased is on the title or deed, additional verifications are required. The extra documentation needed varies depending on if the estate has gone through probate. Whether or not all the heirs are verified and agree to the sale terms can affect the sale speed as well. Whether or not the deceased individual had a standard mortgage or a reverse mortgage, and more can come into play as well. These are not impossible issues, but they do take extra time.
Active Bankruptcy
If the seller is currently in the process of bankruptcy, they may need the court to sign off on the sale. More details on selling during a bankruptcy filing can be found here.
Advantages of Buying a House with Cash
Buying a house with cash is definitely a lot quicker. Since you do not need to get a lender involved, it is also a less complicated process. Here are some of the other advantages of buying a house with cash.
You Are Preferred by Sellers
Sellers prefer cash buyers because they do not have to worry about the deal falling through due to problems with financing. So they tend to prefer cash buyers over the other ones. This can provide you a much-needed edge in a seller’s market.
Save on Closing Costs
Every house purchase with a mortgage includes numerous closing costs. That includes things like origination fees, discount points, and appraisal fees. You can avoid all of those expenses when buying a house with cash.
Tap Into Your Equity
When you apply for loans like a home equity loan or home equity line of credit (HELOC), the amount that you qualify for depends on the amount of equity you have in your house. So if you have recently bought a house with a mortgage, you will qualify for a relatively small amount.
You will qualify for a much larger loan when you buy a house with cash since your equity in the property is high. Cash buyers can get a home equity loan as high as 80% of the value of their house right after the purchase.
Final Thoughts
If you are looking to sell your home fast, contact us to get a cash offer on your home. We do not use hard money financing, typically request no option period, no appraisal, and have an excellent relationship with our preferred title company. These factors allow us to push the process at the fastest possible speed. Our ability to close fast can be helpful for sellers who need to sell their homes before a certain date due to an impending foreclosure or other financial issues.
When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you’ve gained the maximum benefit from your home sale or purchase.
Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200