There are several different methods you can take to purchase a new home. One oft-overlooked method is to make an all-cash offer to the current owner of the property in question. While the process of buying a home can be difficult and somewhat time-consuming, purchasing a home with cash helps to simplify the entire process and can provide you with a number of tangible benefits. While you’re not actually handing cash to the seller of the home, this type of purchase involves transferring funds via a cashier’s check or electronically.
When buying the house outright, you get to avoid the hassles and interest rates that can come with financing the purchase of a home. There are two different kinds of buyers who typically buy a home outright with cash, which include an individual buyer and a real estate investor. As an individual buyer, your goal will be to purchase the home with the intention to live in the property on your own or with your family. Real estate investors are individuals who want to purchase a home for their investment portfolio. These investors may decide to make improvements to the property and sell it for a profit. They could also use the property for rental purposes, which will allow them to generate income.
Purchasing a home outright with cash comes with numerous benefits that can make this purchasing method more appealing than buying a home with financing. When you’re thinking about the various purchasing methods available to you, it’s important to know more about the many advantages of purchasing a home with cash, which are detailed further in this article.
- An all-cash offer is buying a home outright while involves transferring the funds via a cashier’s check or electronically.
- The process of selling a home is broken down into five simple steps which include signing the contract, proof of funds, hiring a title and escrow company, passing a home inspection, the final close.
- Another huge benefit of an all-cash offer is the process is extremely faster and you may have your new home in a few short weeks!
The Process of Selling a House for Cash
The process of selling a home for cash is considerably more straightforward than selling a home when financing is involved. This process can be broken down into five separate steps.
1. Signing the Contract
The first and most important step is to sign the contract, which is referred to as a purchase and sale agreement. When this contract has been signed, you might hear the phrase “going under contract”, which begins the entire process of closing on the sale of the home. Keep in mind that the contract may not be 100 percent agreeable to you, which means that you can negotiate terms before signing. The real estate agent you’ve hired should be able to help you determine if a contract is fair.
2. Verify Proof of Funds
Because you’re purchasing the entirety of the home with cash, it’s essential that you’re able to show proof of funds. Keep in mind that the seller will typically obtain an earnest payment up front, which equates to 1-3 percent of the price for the home. The proof of funds must be provided in the form of investment statements or bank statements.
The real estate agent you’ve hired for this process will be able to assist you in completing this process and making sure that funds are verified. The earnest money that you ask for upfront is designed to provide you with a small deposit that displays good faith by the buyer when they begin the process of purchasing the home. In the event that the buyer decides to back out of the contract, they will lose the earnest money that they’ve deposited with you.
3. Hiring a Title and Escrow Company
At this point, it may be up to you to hire a title and escrow company. Your role in this process depends on the state you live in. In some states, the seller is required to hire a title and escrow company. With other states, the buyer is responsible for this task. The title company that you hire will make sure that all of the property lines have been drawn correctly and that property liens haven’t been issued against the home in question. A property lien is a kind of legal claim that’s placed on assets to allow the lien holder to take possession of the assets if remaining debts aren’t effectively paid.
If you owe child support or haven’t paid your taxes on time, a lien may be placed on your home. Keep in mind that the home can’t be sold until the lien has been properly cleared. The title company will make certain that no liens are currently on the home that you’re selling. They will also oversee the transfer of property ownership on closing day. As for the escrow company, they manage all of the closing documents, complete any legal paperwork pertaining to the sale of the home, and manage the transfer of funds from the buyer to the seller. It’s possible that a single company can handle both title and escrow processes.
4. Passing a Home Inspection
Once a contract has been signed and the process of selling the home to the buyer has begun in earnest, an inspection of the home will need to take place to make sure that the condition of the home and its amenities is as advertised. An inspection is important for the buyer to be confident in the investment they’re about to make. The home inspector who facilitates this process will check all of the appliances, systems, and structural features throughout the home to assess their current condition.
When it comes to appliances and systems, the most important items that the home inspector will focus on include the HVAC unit, the electrical system throughout the home, and the water heater. The inspector will then take pictures and write down extensive details about any issues that they’ve found during the inspection. Once the inspection report has been completed, it will be handed over to the buyer. The buyer will then start the final negotiation before closing if there are some issues that need to be addressed. The seller could lower the price of the home or provide some cash for closing costs. When these negotiations have been completed, the final closing of the home can occur.
5. Final Closing
The home is now ready to be closed on, which means that the transfer of ownership can occur. While this process is relatively straightforward, there are some things you should be aware of, which include:
- Settlement statement – This document details all money involved in the transaction, which includes the sale price, utility bills, and payoff balances
- Certificate of title – You will sign this document to swear that you have the right to effectively sell the property
- Title deed – This is a standard document that’s responsible for transferring ownership to the buyer, after which the title deed will need to be recorded directly at a local courthouse
- Loan payoff statement – When selling a property, this statement denotes how much money you still owe to the mortgage provider, which should be the same as the total amount that the escrow company pays for you
- Mechanics liens – You officially swear that no extra liens are on your property from laborers or contractors
- Bill of sale – This document identifies any extra items that are included within the finalized deal, which could be a refrigerator or washer/dryer unit
- Statement of closing costs – A document that states that you were notified of all closing costs
- Statement of information – This document requires you to swear that you are exactly who you say you are
The Real Estate Closing Timeline
The real estate closing timeline is relatively quicker with an all-cash purchase when compared to a financed purchase. For an all-cash purchase, the closing timeline can be as short as a couple of weeks. On the other hand, a financed purchase takes longer to complete since the mortgage lender will need to process the loan that they’re about the provide. In general, a financed purchase can take anywhere from 30-45 days to be completed.
What is Necessary to Close a Cash Deal?
When it’s time to close a cash deal, there are several things that are needed for this specific process. The items that you should take with you to the closing meeting include:
- The ID that has been issued to you by the government
- The deed in the event that your home is fully paid off
- Remotes to any garage doors, codes to alarm systems and keyless entry systems, and any house keys that you have
- A cashier’s check or certified check that will cover all outstanding costs for the home, which extend to prorated utilities, lien payments, and property taxes
Make sure that you contact your real estate agent to confirm that you have everything that’s needed for the closing process. Buying a home with cash comes with numerous perks when compared to purchasing with financing. For one, the closing timeline is much quicker and can be completed in just two weeks, which is considerably shorter than the 30-45 day timeline of a financed purchase. It’s also important to note that avoiding financing means that you won’t need to make monthly payments on the home or pay interest.