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Why pay cash for a home? Mortgage interest is tax-deductible, and many homeowners appreciate the deduction. If you only pay cash for the down payment, and take out a mortgage for the remainder of the purchase price, it keeps more money in your pocket. Despite this, there are benefits to a cash offer.
In a competitive market, paying cash could help you beat out other homebuyers. Sellers tend to prefer all-cash offers because those deals close more quickly. Byron Ford, an agent in New Bedford, Massachusetts, works with 76% more single-family homes than other agents in his area. Given the persistent low supply of homes on the market over the last few years and rising interest rates, he’s seen a sharp uptick in cash offers.
Even the more challenging market conditions of 2024, as described by top agents surveyed by HomeLight, hasn’t significantly dimmed the appeal of cash offers. In fact, while the volume of real estate transactions has decreased and inventory has risen, inventory remains relatively tight. As of late 2023, the National Association of Realtors (NAR) estimates a 3.6-month supply of homes on the market (a 6-month supply is considered balanced).
That means the market remains fairly competitive, which is reflected in both persistently elevated home prices, despite the economic downturn, and the ongoing ubiquity of cash offers. NAR reported in November 2023 that cash offers made up 29% of buyers had all-cash sales, up from 26% last year.
Ford speculates that one reason cash is popular is that “you don’t have to go through the appraisal or the bank approval process — it’s cleaner.”
But other than reaching the closing table faster with cash, especially if you need to sell your house fast, another advantage to a cash offer is that it saves you money long-term, especially when buyers are facing higher interest rates.
Michael Simpkins, a real estate agent in Florida who’s worked with 69% more single-family homes than the average agent in Apollo Beach, says another advantage to paying cash over taking out a mortgage to buy a home is that you’ll save on closing costs. He estimates that on a $200,000 house, you could save between $5,000 and $6,000 in closing costs.
Paying cash saves you money, and you might need a place to live sooner rather than later. But just how long does it take to close on a house with cash, compared to a traditional loan?
Setting the standard
If you’re buying a house with a standard mortgage, closing takes about 45 days, according to data from ICE Mortgage Technology. Why does it take this long?
Buying a home is a large financial transaction with many legal ramifications. Everyone involved will need time to perform their due diligence. The bulk of the time, however, is consumed by loan underwriting and processing.
A cash buyer can skip everything related to a mortgage, from the home appraisal to income verification, which saves them a ton of time. But there are still some loose ends that the cash buyer should tie up before racing to the closing table.
When you can do a cash offer and a quick close in 7 to 10 days, it certainly makes sense to that seller, who has a payment due at the end of the month or who needs to move out quickly.
- Michael Simpkins Real Estate AgentCloseMichael Simpkins Real Estate Agent at Keller Williams South Shore Currently accepting new clients
- Years of Experience 25
- Transactions 568
- Average Price Point $371k
- Single Family Homes 494
A cash sale: Start to finish
Every home sale has its quirks, but in general, “a cash sale can be turned over in a week to two weeks,” according to Suz Poepke Pohl, owner and escrow agent at Cygneture Title for more than 10 years. With a cash sale, you can skip a few steps in the typical closing process.
Here is roughly how long it takes to close on a house with cash.
The cash buyer makes an offer, and the seller accepts it: 1 day
Making an offer and having it accepted works a lot like any other home sale — unless you’re asking for a cash discount. If the seller has an urgent need to close quickly, they might be willing to negotiate a lower price in exchange for a quick close.
Simpkins points out: “When you can do a cash offer and a quick close in 7 to 10 days, it certainly makes sense to that seller, who has a payment due at the end of the month or who needs to move out quickly.”
A cash offer can also work in your favor if the owner has put in an offer on another home, and they need a solid offer on their home to move forward.
The seller needs to verify that the cash buyer has the money to buy the house: 24 to 48 hours
With a mortgage, the bank verifies that the buyer has the down payment available to close. Without a lender to verify funds, the seller will likely request proof of funds and earnest money from the buyer.
Some cash buyers may choose to supply this information with their offer letter; others may need to contact their bank and arrange for funds verification. This can be done before you make the cash offer to streamline the process.
Secure title and escrow services: 1 day
The escrow company will hold onto all the money while the deal is done, such as any earnest money you’re putting down. They’re a third party in your proceedings, ensuring that all the conditions of your real estate transaction are met. Many companies combine title and escrow services under one roof, as their functions are closely interrelated.
Your agent can help you find a title company to handle the title search, and title insurance, which is always recommended. This task can happen while you’re obtaining the funds verification (if you didn’t do that in advance), as your bank will need information on where to transfer the money.
Submit earnest money: 1 day
An earnest money deposit demonstrates your good faith to go through with the offer. In some cases, violating terms of the purchase agreement allows the seller to keep your earnest money. Earnest money could be a flat amount or a percentage of the total sale price.
Whether you arrange for a wire transfer or write a good old-fashioned check, it will take at least a day for the earnest money to clear. Once it’s in the escrow company’s account, you can move forward.
Title search: 3 days
The title search goes back through a home’s title history to make sure there are no outstanding liens or heirs listed on the title. Even in a cash deal, you “still have to make sure that the property is clear of any encumbrances and any title issues at all,” Pohl says. Failing to verify a clean title could result in financial and legal headaches down the road.
While this typically takes just a few days, if the home has been through a foreclosure or short sale, it could take longer.
Mortgage lenders buy title insurance for themselves — it’s a good idea for buyers to do it, too. Before becoming an escrow agent, when Pohl bought her first home, she didn’t purchase title insurance. Years later, when the time came to sell, the title search discovered an outstanding judgment against the property. Even though it wasn’t her debt, she had to pay it off to sell the house.
Inspections: One week to book; 2 to 4 hours to complete
Cash buyers can waive an inspection in their purchase agreement, but it’s a very good idea to still have the property inspected “for informational purposes only.” This language in a purchase agreement reassures the seller that you’ll still go through with the purchase even if the home inspector finds issues.
An inspection can identify a serious hidden problem that could impact the home’s value. You also want to know what you’re getting into in terms of repairs, upgrades, and permits. It can take up to a week to book a standard inspection, and most inspectors will spend two to four hours in the home. Specialized inspections, such as a sewer scope or radon testing, might take more time.
Appraisal: 15 minutes to 5 days
An appraisal isn’t necessary in a cash deal, but Simpkins says that “unless it’s obvious that they’re getting a steal, I think they should still do an appraisal.” He points out that most cash buyers are buying, at the very most, once a year, and have less experience in the marketplace. Even though he closes five to eight homes a month, he’d still get an appraisal if he was doing a cash deal.
It’s a good idea to ask for an appraisal and include it in your purchase agreement to make sure that the home is worth the full purchase price. If you were working with a lender, the appraisal fee would be part of your closing costs; otherwise, it will cost anywhere between $313 and $422 for an appraisal.
An appraisal can take as little as 15 minutes (for a desktop appraisal) up to two weeks, including the time taken to write up the report. This time frame depends on many factors, such as the level of local market activity and how easy it is for the appraiser to find recent comparable home sales.
If the home appraises lower than the purchase price, it’ll be up to the cash buyer whether to move forward with the deal as-is or renegotiate. Ford says, “The biggest delay we’ve had is getting the appraiser out there; they’re going two or three weeks before they can get to an appointment,” which could add some time to closing.
Final walkthrough: 1 day
The day before you’re scheduled to close, you and your real estate agent will do a final walkthrough. Your agent takes you through the home to make sure that the previous owners have completely moved out and that it’s move-in ready. If the sellers agreed to perform any repairs after the home inspection, you should check to see that they’ve been done.
Essentially, you’re ensuring that the house is in the same (or better!) condition that it was when you agreed to buy it.
Closing: 1.5 to 2 hours
When all these tasks have been completed, it’s time to close. Without the mortgage paperwork to sign, this should be pretty simple — less than an hour, and you’re finished. But Pohl has seen some closings where the buyer was paying cash drag on for more than three hours because of improper purchase agreements.
In one case, she says the parties “were walking in and out; they didn’t have a Realtor® and didn’t have a properly executed purchase agreement. In the end, the buyer paid for the seller’s fees so we could get it closed.” Even though you can skip some steps in a cash deal, you still need experienced professionals to help with paperwork.
Adding it all up
When you add everything together, here’s the absolute fastest you could close on an all-cash deal: about two weeks.
If you’re ultra-efficient, you could shave some time off: Ford notes that he’s had cash offers close in as fast as seven to ten days. Keep in mind that many of these steps, such as an appraisal and your home inspection, can happen at the same time.
What can stretch out the timeline when you buy with cash?
Despite you and your agent’s best efforts to get a fast close, things can come up. Here are some common situations that can add days to the closing process.
Liens on the house
Unfortunately, not all title searches return a clear title. The title company could find past due property taxes or assessments, a lien from an unpaid contractor, or unpaid homeowners association dues. The sale can’t close until these liens have been cleared.
What if the seller has declared bankruptcy? Then they might need the court to approve the sale.
When someone on the title is no longer living
If someone listed on the title has passed away, you’ll have to take some extra steps to obtain a clear title. Required additional documentation will depend on whether the estate has cleared probate.
If not all of the heirs are verified, and not all of them agree to the sale terms, that can slow the process. If the deceased had a mortgage or reverse mortgage on the property, that will be another hurdle to clear.
Unfortunately, sometimes people lie during the home sale process. A seller might have intentionally left something off the seller’s disclosures (in states where those are required), or tried to conceal a major defect. The title company or home inspector could find an issue that delays the sale while you work to clear it up — or choose to walk away.
If you have concerns about your home purchase — whether you feel rushed or nervous about spending that much cash — your agent might suggest adding an option period into the contract. During this time period, you could change your mind. Option periods typically allow you to back out of the sale without any legal or financial issues.
Be aware that, in a hot market, many sellers dislike option periods even if you’re paying cash.
When you’re paying with cash, the appraisal isn’t as important. You don’t need the house to appraise to qualify for a mortgage. However, it’s not a comfortable feeling to buy a house for more than it might be currently worth.
If an appraisal comes in low, you have a few choices. You can try to renegotiate the price, request a different appraisal, or back out of the purchase.
What if you don’t have cash?
As 2024 begins, the average sale price of a home in the United States is projected to rise to $468,000. You might be wondering — how are people paying cash for houses?
One way to do it is with HomeLight’s Cash Offer.
Here’s how it works: We make a cash offer on your dream home and buy it for you. Then we sell it back to you after you have secured financing to be able to buy it. Without a financing contingency, you’re more likely to win the home.
It’s possible to buy a house with cash and move the sale along quickly. If you’ve partnered with an experienced team of real estate agent, escrow agent, and title company, closing on a home that you’re buying with cash will be a much simpler process than working with a lender.
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