Why accepting a cash offer is the simpler way to sell you home
Accepting a cash offer on your home is the simpler option compared to the traditional home-selling process. The home-selling process can be complex regardless if you’re a first-time seller or you’ve done it a million times. There’s many parties involved, including but not limited to the buyer, the buyer’s real estate agent, lenders, an escrow company, a title company, and sometimes a real estate attorney.
Luckily, when you accept a cash offer on a house the selling process is significantly simpler. The process is simpler for the following reasons:
- Fewer parties involved
- Less paperwork
- Closing timeline can be expedited
- Lower risk of the deal falling through
What is a cash offer?
A cash offer is when someone buys a house outright, without financing. They transfer the funds electronically or with a cashier’s check in order to close.
Cash offers typically come from two types of buyers:
- Individual buyers – buyers who plan to live in the home themselves and finance the home without the help of a bank.
- Real estate investors – people who invest in real estate to generate cash flow, sometimes called iBuyers .
What is the standard real estate closing time?
Because a lender isn’t involved the closing time for a cash offer is typically shorter.
You can close in as few as 2 weeks when accepting a cash offer on your home. This is just enough time for the title and escrow companies to clear any liens, provide insurance, and get the paperwork ready. Although, the closing date can be adjusted to fit the needs of the seller.
The typical closing time for a financed purchase (one where the buyer is taking out a mortgage) is a minimum of 30 days. Additionally, other popular closing time frames are 45 and 60 days. These timelines are usually chosen to align with relocation plans or the purchase of another property
What documents you can expect to review and sign when accepting a cash offer
• Final closing instructions – A detailed outline of the tasks your escrow company is responsible for, and the process they’ll follow to complete your closing.
• HUD-1 settlement statement – Required by federal law, the HUD-1 is a detailed accounting of all money involved in the deal. It includes everything you will have negotiated up to this point: sales price, payoff balances, pro-rated tax and utility bills, etc. It is important to keep this form for your taxes. Before you sign, make sure the closing agent goes through line by line so you can check for any possible errors.
• Certificate of title – In this document, you sign to swear you have the right to sell the property.
• Title deed – The deed is the document that actually transfers ownership to the new owner. Although you’ll sign it at closing, the transaction will actually be considered closed when it’s recorded at the county courthouse.
• Loan payoff statement – If you have a mortgage, this document shows how much you owe to your lender as of closing day. This amount should match the amount the escrow company is going to pay off on your behalf.
• Mechanics liens – This is for the seller to swear that there are no additional contractor or laborer liens on the property.
• Bill of sale -Outlines any additional items that you and the buyer have negotiated into the deal.
• Statement of closing costs – By signing this document you state you were informed of all closing costs and other fees ahead of time.
• Statement of information – You swear that you are who you say you are
What is the process of closing on a cash offer?
1. Sign the contract
The process starts by accepting the cash offer and completing a Purchase and Sale Agreement contract . This is commonly referred to as “going under contract.”
2. Verify proof of funds
It is important to verify that the buyer actually has the money available because they are using their own cash to close the deal. Typically, you’ll ask for earnest money up front (usually 1-2 percent of the sales price) and request proof of funds in the form of bank or investment statements.
3. Hire title and escrow companies
Depending on your state’s laws either you or the buyer will choose the title and escrow companies. A title company is responsible for making sure the property lines are drawn correctly and that there are no property liens. They also issue title insurance and on closing day ensure that the property ownership change actually occurs. Also, the escrow company is responsible for managing all closing documents. Additionally, the escrow company facilitates the transfer of funds, and completes the legal paperwork that records the sale. In some occasions the same company can handle both the title and escrow tasks.
4. Pass the home inspection
It’s common for buyers to submit their offer with an inspection contingency. An inspection contingency is an addendum that states that the buyer will pay to have an inspection done. Furthermore, this enables the option to request repairs or renegotiate the agreed-upon sale price based on possible findings. Once this last negotiation is complete, you’re ready for closing.
5. Review and sign closing documents
Lastly, get your signing hand ready — it’s closing time, and a mountain of paperwork is pretty much a guarantee, even when dealing in cash.
What is a property lien?
A property lien is a legal notice related to an unpaid debt. A lien may be caused if you fail to pay your taxes or child support. Additionally, this could happen due to the settlement of a court case against you, or if you owe a contractor who has done work for you. Liens can be placed on your home until you settle the debt. Long story short; you can’t sell your home until all liens are cleared. It’s the title company’s job to make sure that there are no outstanding liens before closing.