Key takeaways
- The timeline for receiving the proceeds after selling a house depends on various factors, including your buyer’s financing.
- Whether your state uses a ‘wet’ or ‘dry’ closing method will impact how quickly the funds become available.
- The payment will likely be made via cashier’s check or wire transfer, which can take time to clear but are more secure than other payment methods.
There are any number of reasons why a homeowner might choose to sell. Chief among them, though, is likely to be the money you stand to make on the sale — especially if your home’s value has appreciated significantly since you bought it.
But you usually don’t walk away from the closing table with your sale profits in your pocket (or your bank account). So when should you expect to get the money after closing your home sale? The answer depends on what state you’re in and the exact type of transaction it was, among other things.
When does the seller get their money after closing?
Once you come to an agreement with a buyer to sell your home, the deal is not yet closed. You won’t get paid until the deal is finalized, so understanding the closing process for your particular sale can give you an idea of the timeline for receiving your money.
If the sale is contingent on a home inspection, you’ll have to wait for that to be completed (and for any negotiations based on the findings to be resolved). And if your buyer is financing the purchase with a mortgage, as most homebuyers do, then you’ll also need to wait for the loan to be approved. This process can take anywhere from a few weeks to a few months, depending on the circumstances.
Scheduling a closing day that’s convenient for all parties can take some time as well. In some states, you may be required to attend the closing in person to sign the required documents. Other states allow the closing to happen virtually. Regardless, closing day is when all payments are due from the buyer and their lender.
Keep in mind, though, that this doesn’t mean your money is cleared and accessible to you on that day — that will usually take time, too. (More on this later.)
Cash deals move more quickly
The closing process will take less time if you are working with a cash buyer, since paying in cash means there’s no need to wait on financing. The same goes for online-only iBuying companies, which also make all-cash offers. “Nothing is faster than a motivated cash buyer,” says Howard Dvorkin, a CPA and chairman of Debt.com.
Working with a cash buyer eliminates a lot of the steps to closing, so the process is much shorter. These transactions can close much more quickly than a traditional, financed sale, which means you get your money faster. In the case of iBuyers and cash-homebuying companies, transactions can be completed within a few weeks, or sometimes even a few days. But when you sell to one of these firms, you’ll likely make less: “iBuying is also lightning quick, but you trade price for speed — an iBuyer often makes a lower offer in exchange for getting you the money [fast],” Dvorkin says.
Dry closing vs. wet closing
Closings can either be “wet” or “dry” — terms that can be confusing if you’re not familiar with them. This has nothing to do with whether the payment is in cash or financed, but it does have an impact on how fast the seller gets their money after closing.
“They sound like weird descriptions until you understand the reasons behind them,” says Dvorkin. “A wet closing happens when all the parties show up at the same place and sign all the appropriate documents at the same time. It’s called ‘wet’ because the sale is done when the ink is still wet.” In other words, in a wet closing, the funds are disbursed at closing, rather than after.
In a dry closing, the funds are not available until afterward. “A dry closing means the parties don’t meet,” Dvorkin says. “They sign the documents, those are reviewed separately, and money exchanges hands through a wire transfer or overnight delivery of a cashier’s check. This can take a few days — hence, the ink is dry.”
The majority of states require a wet closing, while Alaska and California allow for either method. Dry closing states include:
- Alaska
- Arizona
- California
- Hawaii
- Idaho
- Nevada
- New Mexico
- Oregon
- Washington
How the payment is made
Buying a house isn’t the same as buying, say, groceries or clothing. When it comes to home purchases, you don’t pay via a simple screen tap or mouse click. Payment for your property will likely be made in the form of a more formal — and more secure — cashier’s check or wire transfer.
With a big transaction like this, it’s important that the money is processed in the safest way possible. “The reason is simple: It’s easier to prevent fraud,” says Dvorkin.
Payments made via cashier’s check are generally available the next business day after they are deposited. Wire transfers typically take somewhere between one and three business days to process.
Home-sale profits and capital gains tax
Selling a house isn’t all profit: There are closing costs and other payments that must be covered, including real estate commissions and paying off whatever balance remains on your mortgage. These costs typically come out of your sale proceeds.
Once you’ve covered all closing costs and fees, whatever amount is leftover is your net proceeds, or the profit you actually walk away with when all is said and done.
If you make enough profit from the sale, you may owe capital gains taxes to the IRS. However, the amount would have to be very significant: “Thankfully, most people don’t need to worry about this — those who do made a lot of money,” says Dvorkin.
Specifically, single sellers who make more than $250,000 on a home sale may trigger the capital gains tax; that amount jumps up to $500,000 for married sellers filing jointly. Other factors come into play too, including whether the home was your primary residence and how long you owned it, so speak to a tax professional if you’re not sure whether this tax applies to you.
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