Very few people have the luxury of controlling the timeline when they move. Some buyers need to purchase a house quickly because their lease is up. Others are separating from a partner or are excited to buy a new home and start a new job in a fresh city. For whatever reason, buyers often have to juggle moving out of one place while trying to close on another.
This process is a little easier if you are able to close on a house with cash because you don’t have to deal with the timeline of the mortgage company. However, there are still some barriers that can slow this process down. Answer, “How long does it take to close on a house with cash,” so you can feel prepared when buying.
Understanding Cash Offers
Cash offers come from buyers who have enough money in the bank to purchase the property outright. Buying a house with cash is just like purchasing a pack of gum at the grocery store. As long as your check clears, the home is yours.
A cash offer is different from a mortgage-based offer where the buyer needs to secure a loan to purchase the property. With a mortgage-based offer, the buyer will have enough for a down payment (a percentage of the home’s value) and the lender covers the rest.
A mortgage-based buyer will need to prove that they are pre-approved for the loan. This means they and the bank are confident that the application will get approved. Conversely, a cash buyer needs to provide proof of funds (POF). This is a document showing they have enough money in the bank to afford the property.
Sellers prefer cash offers for multiple reasons. First, the seller won’t have to wait for the loan to get approved (a process that takes multiple weeks) which means both parties can close on the home faster. There is also less risk of the financing falling through because the loan was rejected, which would force the buyer to walk away from the house and leave the seller starting the marketing process all over again. Overall, an all-cash offer is seen as a lower-risk option.
The Timeline for a Cash Sale: Start to Finish
Every home sale is unique, which means you can complete a cash sale in a few days or a few months depending on each party involved. The following steps outline each part of the cash sale and purchase process so you can see who is involved, how long it takes to close on a house, and factors that could slow the sale down.
Making an Offer and Seller Acceptance
The first step in buying any home (regardless of financing) is to look at the property and make an offer on it. The seller will review your offer and any others they receive to choose the best option. Occasionally, the seller will counter your offer with a higher price and you can enter a period of negotiation with them until you agree on a fair deal.
Most sellers take about 24 hours to review an offer. However, it could take a few days to negotiate their counteroffers.
Verification of Funds
This is where the POF document comes in. When you are making an offer, the seller might be content with screenshots of your accounts to know you have enough money. However, the seller’s agent will need to formally confirm that these accounts are accurate before moving forward. This should take around one business day because the banks need to be open.
Securing Title and Escrow Services
This is usually a step that a seller completes. They will look up which company holds the title of their home and request the firm’s services to help with the sale. The title company works as the intermediary in the sale and will help transfer the property’s ownership from one person to the next. The title company can also provide escrow services by holding onto the earnest money deposit.
Submission of Earnest Money
Earnest money is a cash payment the buyer puts into a secure account (usually managed by an escrow company) to prove they are serious about buying the house. If the buyer walks away from the deal without a valid reason, the seller might be able to keep this deposit.
The earnest money deposit is usually around one percent of the home’s value but might be more in competitive markets. The rules around earnest money vary by state. However, most sellers have three business days to submit their funds to the escrow company before the deal can move forward.
The title search is an overview of the property to make sure it is clear for sale. For example, the title report will ensure there aren’t any liens on the property (debts that the seller or previous owner owes) or restrictive covenants that prevent the home from being sold. The title search will also confirm the owner of the home to prevent fraudulent parties from selling homes they don’t actually own.
This process should only take one business day but might take a few days longer in some cases.
A home inspection is conducted by an objective third party that evaluates the state of the house. The inspector will provide a report on the foundation, roof, windows, plumbing, electric system, appliances, HVAC, water heater, and other elements of the house. This is not a pass/fail process, but rather an objective statement about the property.
If the inspector finds any issues that significantly bring down the value of the property, the buyer might bring a new offer to the table or walk away from the deal. (For example: untreated foundational termite damage or a home built over a sinkhole.)
Once the offer is accepted by the seller, the buyer has a small window to complete any necessary inspections. This window is usually included in the offer and falls between 7 to 14 days. If a buyer cannot find an inspector during this time, the seller might be willing to extend the inspection window.
Inspectors are focused on the state of the house, but home appraisers are focused on the value. The appraisal confirms that the asking price for the house aligns with its actual value. This means everyone is getting a fair deal. The appraiser will look at comparative homes that have sold recently, the state of the property, and any features that can add value to it.
The appraisal timeline is similar to the inspection period – usually one to two weeks. However, a cash buyer might be able to waive the appraisal if they desire. This is a requirement for a mortgage but not for cash purchases. Cash buyers can also waive the inspection if they so choose.
Once all of the inspections and appraisals are complete, both parties can move forward with the sale. The real estate agent for the seller will draft the closing paperwork and the current homeowner will move out. The final walkthrough usually happens the day before the closing appointment (but it can also be done the day of). The buyer will confirm the house is in good condition and agree to buy it as-is.
This is the final step in the home sale process. During this time, the buyer sends the funds to the title company which will send them to the seller. Both parties will cover their closing costs and sign the necessary paperwork to transfer ownership.
The closing date on a cash purchase is often much closer than one for a mortgage-based purchase. A buyer that waives the appraisal and inspection (or secures these appointments quickly) can close on a house within a week of making an offer – as long as the seller no longer lives there.
Both the buyer and seller will agree on a closing date that works for them in the offer negotiations.
Potential Delays in a Cash Sale
While cash sales are known for being fast, there is always a chance that you might encounter some delays in the buying process. Here are just a few issues to look out for that could prevent your ability to close on a house.
Liens on the Property
A lien on the property is a legal claim by a creditor who is still owed money. For example, if the seller paid a contractor to install a pool but never paid them, the contractor could put a line on the property.
Your Realtor will check for any liens (even if you are doing a cash sale) and the owner will have to clear them before they can sell the house. It is not advisable for buyers to purchase properties with liens on them.
This process can grind the home sale to a halt – especially if the seller wants to dispute a lien and potentially take the creditor to court to contest it.
Another factor that can slow the home sale is if the seller is going through bankruptcy. They will need to reach an agreement with their creditors before moving forward, which could take anywhere from a few weeks to several months.
A quality Realtor should be able to determine why a seller is listing a property so you can avoid making offers on houses that are under the scrutiny of a bankruptcy court.
Deceased Person Being on Title
When the title company pulls the documentation on the house, they might notice that one of the owners passed away (like a spouse that co-owned the property). Additionally, you might want to purchase a house that is going through probate or that was left to someone in a will.
It is the title company’s job to secure the death records of the person on the title and confirm that the home is able to be sold.
This is one of the biggest risks of buying a house. The seller could lie about anything from the physical state of the house to the current ownership of it. The seller might even try to hide issues like loud barking dogs next door or an airstrip nearby that causes planes to noisily fly over throughout the day.
This is why cash buyers still need to hire real estate agents. Experienced Realtors can look out for red flags and intervene if a seller is being dishonest. They can also help their buyers walk away from bad deals.
Advantages and Disadvantages of Buying a House with Cash
If you are considering paying cash for a house, know that there are benefits and drawbacks to this option. While cash buyers are often preferred by sellers – making your offers more competitive – you might not want to tie up all of your liquid assets in a house. Keep reading to learn more about making a cash purchase.
Advantages of Buying with Cash
Preferred by Sellers
Sellers prefer cash buyers because they are perceived as less risky. They don’t have to worry about the bank holding up a loan and potentially denying it. Sellers also know that cash buyers can close faster, which means they can move out sooner.
Saving on Closing Costs
Buyers have to budget for a variety of closing costs including title insurance and the fees related to the inspectors and appraisers. Taking out a loan also comes with a variety of costs ranging from the application fee to processing fees and other expenses. Buying a house in cash is a great way to save money by skipping over some of the loan-related expenses.
Quick Closing Process
A cash buyer doesn’t have to wait for a bank to get approval to buy a house. Many cash buyers can close within a week or two of making an offer. This appeals to both buyers and sellers who are eager to streamline the process as much as possible.
Disadvantages of Buying with Cash
Tying Up Liquid Assets
One thing to be careful of if you want to make a cash offer is that you will have enough money in the bank to cover basic living expenses and emergencies. For example, you might need to replace your roof, cover an emergency medical bill, or buy a new car because you are in a wreck. Too often, people become “house rich and cash poor” which means their assets are in the home, not in money in the bank.
You can prevent yourself from falling into debt by setting aside some funds – even if it means you need to take out a mortgage.
Losing Potential Investment Opportunities
Buying a house is an investment, just like buying into the stock market or putting money into a business idea you believe in. If you put all of your cash into your home, you might limit your ability to make other investments. Make sure you still have a diverse portfolio and the ability to grow your wealth in different ways while you are looking for homes to buy.
The Bottom Line
A cash sale is a great way to get your offer noticed by sellers in a competitive market. A seller is more like to choose a buyer who can purchase a house with cash. This will streamline the sale process and reduce their risk when moving out. If you make an offer, be clear that you can close a house quickly and work with the seller’s schedule. This will make your offer even more appealing compared to others.
If you are new to the home-buying process (or if the market has changed significantly since you bought a home) make sure you work with a real estate agent you can trust. They will guide you through each step of the process and set timelines to complete each hurdle. To find a Realtor, turn to the top real estate agents at Fast Expert. We can connect you with leading professionals who know how to get cash offers noticed.