Why pay cash for a home? After all, mortgage interest is tax-deductible, and taking out a mortgage keeps more money in your pocket. One reason why sellers tend to prefer all-cash offers is because those deals close more quickly. In a competitive market, offering cash could help you beat out other homebuyers. But one of the biggest reasons to make a cash offer is that it saves you money long-term.
Michael Simpkins, a real estate agent in Florida, thinks that the advantage to paying cash over taking out a mortgage to buy a home is that you’ll save a lot on closing costs. “On a $200,000 home, you’ll save $5,000 to $6,000 dollars in closing costs,” he estimates.
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 48 days, according to the January 2020 Ellie Mae Origination Insight Report. Buying a home is a large financial transaction with many legal ramifications, and 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.
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 the past 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 have to 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 always 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, just like earnest money if you’re buying a home with a mortgage. They’re a third party in your deal, 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.
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.
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. An inspection can identify a serious hidden problem which 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 most, once a year; he closes five to eight homes a month, and 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 between $300 to $400.
An appraisal can take as little as 15 minutes up to several hours, and the appraiser might take a few days to write up their report. This timeframe 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, 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 they 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 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. Keep in mind that many of these steps, such as an appraisal and your home inspection, can happen at the same time.
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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