Buying a home with cash is an exciting and straightforward process compared to traditional financed purchases. Without the complexities of mortgage approvals, cash sales typically close faster and involve fewer hurdles. However, if you’re new to this process, you may wonder how everything works—especially when multiple people are listed on the title. Here’s a clear overview of the cash home-buying process, from signing the purchase agreement to distributing the funds, and answers to common questions along the way.
Step 1: Signing the Purchase Agreement
The process begins when the buyer and seller agree on the terms of the sale. A purchase agreement is signed, which includes details like the sale price, contingencies, and closing timeline. At this stage, the buyer may be required to submit an earnest money deposit to show their commitment to the deal. This deposit is held in escrow, a neutral third-party account, until closing.
Step 2: Escrow is Opened
Once the purchase agreement is signed, escrow is opened. The escrow company manages the transaction, ensuring all funds and documents are handled securely.
During this step, a title search is conducted to verify ownership and identify any outstanding liens or claims on the property. The buyer will want to ensure the title is clear before moving forward.
Step 3: Preparing Funds and Closing Costs
As the closing date approaches, the buyer transfers the full purchase amount, including any closing costs, into the escrow account. At the same time, the seller’s mortgage lender (if applicable) provides a payoff statement to the escrow company, detailing the exact amount needed to clear the loan.
Step 4: Signing Closing Documents
Both the buyer and seller sign the necessary closing documents. The seller signs the deed to transfer ownership, and the buyer signs settlement documents that finalize the transaction. These documents are notarized and prepared for recording with the county.
Step 5: Distribution of Funds
Once the documents are signed and the funds are received, the escrow company disburses the money in the following order:
- Outstanding Liens: The escrow agent pays off the seller’s mortgage or any other liens tied to the property.
- Closing Costs: Escrow fees, title insurance, taxes, and other transaction-related costs are paid.
- Remaining Proceeds: The remaining balance, often called the “net proceeds,” is distributed to the individuals or entities listed on the title.
How Funds are Distributed When Multiple People Are on Title
If multiple people are listed on the title, the net proceeds are divided according to the ownership agreement. This may be split equally or based on specific ownership percentages, as outlined in legal documents like a tenancy agreement or operating agreement for LLCs. If no formal agreement exists, the proceeds are usually divided equally. It’s important for all title holders to agree on the distribution method before closing to avoid delays.
Step 6: Recording the Deed and Closing the Deal
The signed deed is recorded with the county, officially transferring ownership to the buyer. Once the recording is complete, the buyer receives the keys and takes possession of the property, marking the end of the transaction.
Final Thoughts
Buying a home with cash simplifies many aspects of the real estate process, but understanding how funds are distributed is critical, especially when multiple parties are involved. To ensure a smooth transaction, work closely with your escrow agent and communicate openly with all parties on the title. With a clear plan and proper guidance, your cash purchase can close quickly and efficiently, allowing you to focus on enjoying your new property.
