What happens at closing when you sell to a cash buyer

How a cash sale gets to closing

With us, it starts with a phone call. If the house is a fit, we give you a number by phone. Nothing goes on paper until you agree to it. Then we put the offer in writing, and you pick the closing date. You do not need to clean out the house first.

Cash means the buyer is not borrowing money to buy the house, so there is no loan approval to wait on. That does not make a closing automatic. A sale still depends on clear title, a signed contract, and funds that are really there, which is why the steps below matter.

Who runs the closing

A third party handles the closing. This person or company gathers the legal documents and handles the money. In most of the country that is a title company or settlement agent. In some western states it is called an escrow agent. In parts of the Northeast and South, an attorney may be required.

When you sell to us, a licensed title company or closing attorney always handles the closing, and they pay you, not us.

Ask early who it will be, how to reach them, and what they need from you. Keep their phone number somewhere you can find it. You will want it again near the end.

What earnest money is

Earnest money is a deposit a buyer pays to show good faith on a signed contract. The CFPB notes that it is held by a seller or a third party, such as a real estate agent or a title company.

When you sell to us, our earnest money deposit is held by the title company or closing attorney, not by us.

Your contract should say how much the deposit is, who holds it, and what happens to it if the sale does not close. Read that part before you sign. If it is not in the contract, ask for it to be added.

Title work and liens

Before closing, a title professional searches public records for debts, court judgments, and other problems with the property. The search can turn up old mortgages, unpaid property taxes, and unpaid child support. If something shows up, the title professional works to clear it. If it is not easy to fix, you will be told.

You can speed this up. Tell the buyer and the closing agent about anything you know of, such as a second mortgage, a home equity loan, unpaid taxes, or a contractor you have not paid. Surprises found late are the ones that delay a closing.

How mortgage and lien payoffs work

If you have a mortgage, it is paid off out of the sale price at closing, before you receive your share. The same goes for other debts that are secured by the house. Your payoff amount is not the same as your current balance. The CFPB explains that it includes interest through the day you plan to pay off the loan and may include unpaid fees. If you pay a loan off early, a prepayment penalty can apply.

Ask your servicer for a payoff statement, and ask for it as of your closing date. The closing agent will need the final figure, so ask how they want to get it. If the payoffs look larger than the sale price, stop and talk with your lender and the closing agent before you sign anything.

With us, there are no fees or commissions, and we pay the closing costs. Your mortgage and other payoffs still come out of the price, because they are debts against the house.

What you sign

The main document is the deed, which transfers ownership to the buyer. You will also see a statement that lists the money coming in and going out. The form can look different on a cash sale than on a financed one, so ask your closing agent which one you will get. Some documents have to be notarized, so bring a government photo ID and ask what else to bring.

Ask for copies ahead of time. Read the numbers and compare them with your written offer. If something does not match, ask about it before closing day, not at the table. Everyone who owns the house usually needs to be part of the signing. Tell the closing agent early if an owner has died, moved away, or cannot attend.

The person who handles the closing generally reports the sale to the IRS on Form 1099-S and gives you a statement. Whether you owe any tax on the sale is a question for a tax professional.

When the money arrives

The buyer’s funds go to the closing agent first. The closing agent collects the money from the parties and pays the seller and the people owed at closing. How and when you are paid depends on the closing company and your state. Ask whether it will be a wire or a check, and when you can expect it.

Closings are a target for fraud. Scammers send fake emails that change wiring instructions, and the CFPB advises that you never follow payment instructions sent by email. If anyone sends you new instructions for your money, call the title company at a phone number you already had before acting on them. Be just as careful when you send your own bank details.

Questions to ask before closing day

A short list makes the day calmer. Write down the answers so you are not relying on memory.

• Who is handling the closing, and what is their phone number?
• What is the closing date, and what time and place?
• What is my payoff amount as of that date?
• What documents and ID do I bring?
• How will I be paid, and when?
• When do I hand over the keys, and what should be out of the house?