When Does the Seller Get Money After Closing | Real Estate Closing
Are you in the process of, or thinking about selling your home? A real estate transaction is a big decision and you might be wondering: when does the seller get money after closing? It’s important to take into consideration the timing of funds when getting involved in a real estate transaction, as some transactions could take 2 months to fully disburse funds. Today, we’ll talk in detail about what the closing process is like for sellers.
When does the seller get paid after closing?
The short answer is–around 1-2 business days after closing, and 30 - 45 days for the escrow, or attorney review, process. The seller usually gets paid 1-2 days after closing. Before closing, the escrow or attorney review process can take 30-45 days (this is the process for the buyer to conduct their inspections, tidy up their loan documents, and negotiating any credits). In sum, if you’re selling a home or thinking about selling your home, don’t expect to get paid until around 30-45 days after you accept and offer. To understand fully why it takes so long, it might be helpful to also understand the process of how to buy a house. This would give you the buyer’s perspective and proceedings.
Wet Funding vs Dry Funding:
State regulations differ and can influence when a seller gets paid after closing
You may have come across these two terms: wet vs dry funding, and it refers to state regulations that dictate when a seller can be paid after the closing of a real estate transaction. Most states are in a “wet funding” regulation whereas many West coast states are in a “dry funding” regulatory environment.
To make it easier, we’ll name the states that have dry funding regulations:
Alaska
Arizona
California
Hawaii
Idaho
Nevada
New Mexico
Oregon
Washington
In these 9 states, expect the seller to get the funds after closing a few days later than in the other 42 states.
What are the steps in closing for a seller to get paid?
A typical real estate transaction involves many steps summarized as the escrow process. Here’s a quick rundown of each step and what they mean:
1. Pre-Escrow: Negotiation of Offer and Contingencies (1-3 days)
Before the actual escrow period begins, an offer has to be made by the buyer and accepted by the seller. At the same time, the offer will also include other items called “contingencies” which dictate other terms that the buyer and seller has to agree to. This process can take anywhere from 1-3 days with back and forth (counteroffers).
2. Fund Deposit and Create Escrow Account (5-7 days)
Once the offer is accepted, the buyer deposits their “good faith deposit”, or earnest money deposit, into an escrow account. The escrow process then officially begins, and the escrow account is managed by a third party provider. Note that the third party provider can be an escrow company, a law firm, title company, or even bank. Typically the escrow company makes money by taking a 1-2% fee from the transaction.
3. Schedule Inspections and Appraisals (8-21 days)
Once the escrow process formally begins, typically the first step for the buyer is to schedule a home inspection with an inspection company/inspector. The inspector then visits the home and conducts a detailed check of the entire home, checking for faults and defects in things like:
structural integrity
utility functionality
age/wear and tear
code adherence
leaks or other integrity concerns
Secondly, if the buyer is getting a loan, the lender will want to send an appraiser to the property to make sure that the property is actually worth at least as much as the loan that the buyer has to take out. This is to protect the lender from not getting paid back. If the buyer defaults on their loan, then the lender can at least recoup their loan from seizing the property.
4. Get Final Loan Approval (14-28 days)
After the inspections and appraisals are done, the buyer must get final approval from their lender or bank on the loan amount. This is different from the preapproval process and is a more lengthy process that actually guarantees the buyer is able to take out the necessary loan.
Typically, the bank or lender relies on the value of the target property, and also the buyer’s other credentials such as:
creditworthiness
income level
debt to income ratio (how much debt compared to how much income)
other assets (like cash, other bank accounts, or other properties)
5. Get Funding from Lender (29-43 days)
The final process before the actual funds are transferred to escrow, includes some time to allow buyers to get homeowner’s insurance. At the same time, lenders will typically run a title search to protect themselves (and the buyer) from a clouded title. Sometimes, the right to ownership on a property actually isn’t clear-cut, so the title search prevents any unpredicted circumstances to delay loan funding.
Lastly, if everything checks out, the lender or bank sends the money to escrow and the final closing process begins.
As you can see, it takes around ~45 days for the whole process to get wrapped up and for the seller to get money after closing.
It may also be helpful to understand how to buy a house, from the buyer’s perspective to understand why the process is the way it is.
How is the seller paid after closing?
You might be wondering how exactly sellers get paid after everything is wrapped up in closing? Nowadays, sellers are usually paid either via wire or check and the funds are disbursed by the escrow company.
Check:
This is the more old school way of receiving payments, you will have to receive the physical check, and take it to the bank to cash it in person. Similarly, it may take a few more days after the check is deposited for the funds to be available.
Wire Transfer:
This is the more modern payment method and is kind of like an electronic check. Typically you will have to provide the escrow company with wire instructions (like bank account number, and routing number) and the money will be electronically sent to your bank account. Funds are available for use sooner, typically within 24 hours.
In most cases, it makes more sense to use a wire transfer. Since the escrow company is a third party, there is no room for fraud. This way, your funds are available quicker and quite frankly, it’s an easier process. Ultimately, there is nothing wrong with using a physical check to get paid–it might be more satisfying that way!
Closing Costs for Sellers
As a side topic, we thought it might be helpful to cover the costs that sellers are typically responsible for in a real estate transaction. That way, you can get some idea around how much money a seller can keep after closing, net of all the costs.
| Seller's Closing Cost | Description of Closing Cost | Typical Cost |
|---|---|---|
| Real Estate Agent Commissions | Most transactions have both a buyer's agent and seller's agent. The seller tends to price the buyer's agent fee into the listing price, so even though the seller is "paying the buyer's agent", it's priced into the property. | 5-6% of sold price. For example, for a $1M home, each agent would receive 2.5 - 3% commission, or $25,000 - $30,000 each. |
| Title search | The cost to hire a "title company" in order to verify that the seller actually owns and has full rights to the property. | $100 - 400 |
| Title insurance | An insurance policy that protects the buyer (and the lender) from anything that might be wrong with the title, even if uncovered after the transaction closes | 0.5 - 1% of sold price |
| Escrow fee | The fee charged by the escrow company and split between the buyer and seller. Escrow companies act as a 3rd party to ensure the paperwork and funds are handled appropriately. | Typically a flat fee, $350 - $500, then $1 - 2 per $1000. So for a $1M home on the high end, escrow fees could be $500 + $2,000 = $2,500 split between the buyer and seller |
| Transfer tax | A tax fee that is charged in most states for the transferring of property | Will vary by state |
| Prorated property taxes and other amounts | This would include property taxes that were prepaid by the seller, which is reimbursed, prepaid HOA fees, utilities, and any other amount that should be prorated per closing date. | Varies |
FAQs:
How long after closing until I get my money?
If you chose to get paid via wire transfer, you can expect the funds to be available in 1-2 days. If you chose to be paid by physical check, it could take a few days longer.
When you sell a house do you get all the money at once?
Yes–when you sell a house and get through the closing process, the money is issued to you via physical check, or a wire transfer net of all the associated seller’s costs in a typical real estate transaction
What is credited to a seller at closing?
Seller credits also known as seller concessions costs that the seller agrees to pay for the buyer. This is often used to incentivize a faster close and allowing the buyer to pay for less costs and be able to go through a smoother escrow process.
