As there is so much money changing hands in a vast chain of transactions, the buying and selling of real estate can prove quite the financial quandary.
So, when does seller get money after closing? We discuss some of the potential outcomes of this question.
Sellers typically need that big lump sum to purchase their new home, as do the people they purchase it from, so how and when you’ll receive this payment from the buyer is of paramount importance.
The quick answer is… it depends. Depends on what we hear you ask. Well, mostly on how this sort of thing is handled in your state of residence — It all comes down to wet and dry funding.
Now, if you’re hearing these terms for the first time, we understand that we might as well be speaking in another language, but don’t worry; we’ll lay it all out for you in plain English right here, right now!
So When Does Seller Get Money After Closing?
Most states subscribe to the wet funding blueprint, which – good news – essentially just means you’ll get the total sum of your property sale on closing day — Hooray!
This means the transference of money and property can occur almost instantaneously, streamlining the buy-sell chain.
By contrast, those who live in one of the nine dry funding states will likely have to wait a few days before that sweet lump sum is accessible, up to four days, to be precise.
The Dry Funding States Listed
- Alaska
- Arizona
- California
- Hawaii
- Idaho
- Nevada
- New Mexico
- Oregon
- Washington
… The remaining 41 states are all team wet fund!
What Is Wet Funding?
In a nutshell, wet funding refers to a scenario in which the lender of the money the buyer uses to purchase your property is ready to go at the point of closing.
The lender has verified all the borrower’s information, and the borrower has already signed the mortgage agreement — All the bureaucracy is taken care of.
The only thing left undone is the money transfer, so it happens immediately!
What Is Dry Funding?
Lenders in dry funding states do things a little differently. Rather than approving the loan ahead of time, they’re afforded a grace period to look over the application details.
You will not receive payment until this review period is concluded. If, after reviewing the particulars of the mortgage, the lender decides not to approve the loan, you will not receive any funds.
In other words, in a dry funding state, the closing day does not coincide with closing the sale itself — Strange, we know.
It does away with that lovely streamlined process enjoyed across the US in wet funding states, so it’s crucial to account for this transfer latency when negotiating with the sellers of the property you intend to buy with the funds.
How Long Does It Take For The Money Of A Dry Closing To Come Through?
When you’ll receive your funds after a dry closing depends entirely on how quickly the lender conducts their post-closing date review.
Some might sign on the dotted line after as little as a day’s contemplation, while others may use the total four-day allowance to decide.
Those four days can feel like an eternity, but as long as your buyer’s loan gets approved, you’ll wait no longer!
What Else Impacts The Transference Of Funds After Closing?
While the funding format is the most critical payment date discrepancy to understand when selling your house, there are a few others to consider.
Payment Type
Think carefully about how you wish to receive the funds from your property sale, as this can significantly impact the immediacy of the payment.
We’d suggest wire transfers wherever possible, as domestic payments will be made in as little as 24 hours, while a check takes much longer to clear — We’re talking two days plus.
Seller’s Obligations
When selling your house, there are certain things that you need to get done and dusted before any money can change hands:
- Reviewing and clearing the title
- Home inspections
- Negotiating credit and repairs
- Home Appraisal
- Cover any pressing residual debt
- Signing all the documentation
It sounds like a lot to remember, but your agent will guide you through the process, so don’t worry too much about it. This will be out of the way in most situations before closing day.
Your agent will also inform you of all the items you’ll need to bring on closing day to keep things moving smoothly:
- A valid photo ID
- All keys to the property
- Access codes for electronic locks or devices such as thermostats
- A cashier’s check to cover any additional fees associated with the sale
Cash Buyer
In dry funding states, the lender holds up the transfer, but what if there is no lender?
When dealing with a cash buyer, they can send you the money as soon as you’ve completed all your particulars, meaning there will be no delay.
Where Does The Money Of A Sale Go?
If you’re using the entirety of the sale proceeds to purchase your new property, you won’t see any of it. When the buyer’s funds are finally released, they will be sent to a closing agent who will hold the money in escrow until the sale officially closes.
On the other hand, if you’re keeping the money, you’ll choose between receiving it as a wire transfer or via check.
As detailed earlier, if time is of the essence, you’re much better off choosing a wire transfer, as the longest you’ll be kept waiting is 48 hours, while a check will take at least two days to clear (likely more due to the amount of money in question).
Final Thoughts
Considering everything we’ve discussed in this article is essential if you want the sale (and potentially your acquisition) to go as smoothly as possible.
You’ll need to consider potential lags in the payment pipeline, so you’re covered if you are kept waiting come closing day — As they say… hope for the best; prepare for the worst!
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
- How To Start A Hot Shot Business [2023] - November 24, 2022
- Basic Personal Finance Concepts [2023] - November 22, 2022
- Where To Put Retirement Money After Retirement [2023] - November 4, 2022
