When and How Do You Get Paid When You Sell a House?

By 

Trevor Wallis

Updated 

December 10th, 2020

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Closing process | Wet vs. dry funding | Who pays you | How you get paid | How much

When you sell a home, you'll get paid as soon as you complete the closing process.

In the closing process, the mortgage lender approves and funds the buyer's loan, and both parties sign their closing documents, transferring the property to its new owner.

How quickly you get paid depends on your property's location. In many states, you can get paid on your closing date since all these steps occur on the same day.

But a few states, called dry funding states, require a short waiting period between your closing date and when the lender approves the loan. This gap gives the lender time to review the buyer's loan documents. In dry funding states, you won’t get paid until the lender approves the loan and sends the money to your closing agent.

What is the house closing process for sellers?

After you accept an offer on your house, you have to go through the closing process. This usually takes between four and six weeks, depending on how quickly the buyer gets their loan approval and whether you run into any problems with the home or title.

What happens after you accept an offer on your home

  • Title search. Your closing agent will check public records to make sure you’re the property’s legal owner and have the right to transfer that ownership to someone else. You can purchase owner's title insurance to protect you if they uncover any issues.
  • Home inspection. The buyer will hire a home inspector to assess the structure and major systems of your house.
  • Negotiate repairs and credits. If the home inspection reveals any problems with the home, the buyer may ask you to either fix them before closing or provide a seller’s credit to cover the costs. You and your real estate agent will negotiate these requests with the buyer.
  • Appraisal. An appraiser will come to assess the value of your home for the lender to make sure that the property’s value lines up with the purchase price.
  • Move out. Unless you have a rent-back agreement in your contract with the buyer, you’ll need to pack up and move out before the closing date.
  • Final walk-through. Just before closing (usually within 24 hours), the buyer will walk through the property with their agent to make sure no new issues have popped up since the inspection and you’ve completed all of the repairs you agreed to.
  • Closing date. You’ll sign a bunch of documents and transfer ownership of the property to the buyer.

Many of these steps are required by mortgage lenders, so you may be able to skip a few of them if the buyer is paying in cash or using alternative funding like a hard money loan.

» MORE: What Happens After You Accept an Offer On Your House?

What happens on the closing date

Once you make it to your closing date, you’ll sit down with your real estate agent and closing agent (an impartial third party who facilitates the sale) to sign several documents.

What does the seller sign on closing day?

  • Seller's closing disclosure. An itemized list showing you the sale price, closing costs, final mortgage payment, and — most importantly — how much money you’ll take home from the sale
  • Affidavit of Title. A legal document stating you are the property’s rightful owner and disclosing any legal issues involving either you or the property
  • Deed. A legal document transferring ownership of the property to the new owner
  • Bill of sale. A list of all the personal property you’re leaving in the house (like furniture and kitchen appliances)
  • Loan payoff. A statement from your lender showing the amount of your final mortgage payment including any prepayment penalties
  • Statement of closing costs. A disclosure acknowledging you’re aware of the cost to sell your home

What should the seller bring on closing day?

  • A valid, government-issued photo ID
  • All keys and garage door openers for the house
  • Access codes for electronic locks, garage doors, thermostats, and other devices
  • A cashier’s check for closing costs and seller’s credits not paid out of the proceeds (your closing agent will tell if this is necessary and the amount)

» MORE: 5 FAQs About Your Closing Date and What it Means for Sellers

Wet funding vs. dry funding

The state your property's in will determine how quickly you can get paid after signing all of the closing documents. States are divided into two groups — wet funding states and dry funding states.

What is wet funding?

Wet funding is when a mortgage lender makes the money for a purchase available as soon as the buyer signs their loan documents — while the ink is still wet on the page. This practice makes up most closings in the U.S. since real estate laws in 41 states require wet closing.

If your property's in a wet funding state, you can get paid for selling your home on closing day since the lender has already verified all of the buyer’s information and sent the funds to your closing agent.

What are the wet funding states?

What is dry funding?

Dry funding gives the mortgage lender time to review the buyer's signed loan documents before it actually approves the loan. Since the lender doesn't send money to your closing agent until after its review, dry funding creates a gap between your closing date and when the sale actually closes (and you get paid).

Dry funding happens in only nine states:

  • Alaska
  • Arizona
  • California
  • Hawaii
  • Idaho
  • Nevada
  • New Mexico
  • Oregon
  • Washington

How long do you have to wait to get paid in dry funding states?

If you’re selling your home in a dry funding state, you'll have to wait up to four days after the closing date before you get paid.

This could cause some hiccups if you intend to buy a new house at the same time. You’ll need to consider the lag time between the closing date and when you actually receive your funds before setting the closing date on your new property.

Alternatively, if you haven’t made an offer on a new property yet, you might consider making a contingent offer. This tells the seller that you won't be able to close on a new home until you receive the proceeds from the sale of your current property.

» MORE: Compare top real estate agents in your area

Who handles the disbursement of funds at closing?

When the buyer’s lender approves the loan, they’ll send the money to your closing agent, who holds it in escrow until the sale is complete. An escrow account is a financial account that a third party manages on behalf of the buyer or seller.

Your closing agent will be either a real estate attorney, an escrow agent, or a representative of a title company. The closing agent works behind the scenes to keep all the details of your purchase contract organized and on schedule.

Once you finish closing, your closing agent will be the person who sends you money for selling your home.

» MORE:  Escrow Fees 101: Everything to Know About Escrow

How do you get paid when you sell your home?

When it’s time for you to get paid for selling your home, your closing agent will give you two options: a paper check or a wire transfer. While both options have their own pros and cons, a wire transfer is usually the faster, safer option.

Getting paid by check after selling your home

If you decide to take a paper check, your closing agent will usually hand it to you before you go home on closing day. You get the sweet satisfaction of walking out with the money from selling your home in your hand.

But that doesn’t mean you’ll have access to all the funds immediately. You still have to carry the check to the bank, deposit it, and wait for the bank to add the funds to your account. Your bank can hold any check deposits over $5,525 for up to seven business days.

This delay makes taking a paper check risky if you expect to close on a new property right away.

Should you get paid by check after selling your home?

Pros
Cons
You can get the check on closing day
You have to carry a large check with you to the bank

The bank could hold your funds for several days

Getting paid by wire transfer after selling your home

Wire transfers are the most common way that sellers get paid after closing. If you choose a wire transfer, your closing agent will send the money directly to your bank within 24–48 hours of closing.

While you may have to wait a day or two for the closing agent to send your money, you can access it as soon as the bank processes the transfer. Fortunately, banks have clear rules for when they’ll do that, with most banks processing a wire transfer on the same day it’s received.

One possible delay, though, is your bank’s daily cutoff time. If a wire transfer comes in after that set time, the bank won’t process it until the next business day. You can talk to your bank to find out when its daily cutoff time is and ask your closing agent to send the transfer before then.

Should you get paid by wire transfer after selling your home?

Pros
Cons
The money goes directly to your bank
The closing agent may take a day or two to wire the funds
Safer and more common
If you send it later in the day, the bank might not process it until the next business day
You can potentially access the funds on the same day as the transfer

How much do you get paid when you sell your home?

In most cases, you won’t pocket all of the sale price when you close. You’ll usually have some expenses that need to be paid before you can take home your profits.

Fortunately, you don’t have to worry about writing a bunch of checks and making sure all the right people get paid. Instead, your closing agent uses the proceeds from the sale to pay everyone, including you.

You’ll be able to see where your money is going a few days before your closing date when you receive your seller’s closing statement. This document shows you the sale price, all of your expenses, and your final proceeds from the sale.

What expenses will your closing agent pay when you sell your home?

Your remaining mortgage balance

Unless you own the property free and clear, you'll have to pay off your existing mortgage first. Prior to closing, your lender will send you and your closing agent a loan payoff notice telling you how much your final payment will be, including any fees and prepayment penalties.

Closing costs

Closing costs for sellers can be as much as 8–10% of the final sale price, but they vary based on your contract with the seller and the vendors you use throughout the closing process.

Your closing costs are made up of several smaller fees that can add up quickly. Some of the most common ones include:

Closing cost
What it is
Average cost
Real estate agent commissions
The fee for both the buyer’s and seller’s real estate agents
Seller's agent: 2.5–3% of final sale price
Buyer's agent: 2.5–2.9% of final sale price
Title search
The fee for your closing agent to search public records and confirm that you’re the property’s legal owner
$150–400
Title insurance
An insurance policy protecting the buyer from any problems with the title
$1,000–4,000
Escrow fee
The fee charged by the closing agent for facilitating the sale. The buyer and seller usually each pay half of the total fee
½ of 1% of the final sale price
Transfer tax
A tax (separate from property taxes) some states charge on the transfer of property
Varies by state
Outstanding amounts owed
Various expenses (like prorated utilities and property taxes) prorated based on how much of the billing period you owned the property. You’ll pay these up to the date of sale.
Varies based on your local rates and when you sell the property

» MORE: What Is Realtor Commission?

You could end up paying even more if you agree to pay some or all of the buyer’s closing costs. These expenses typically cost another 2–5% of the final sale price and include fees like:

  • Loan origination fees
  • Appraisal fee
  • Home inspection fee
  • Survey fee
  • Mortgage points
  • Lender's title insurance

» MORE: Try Clever's free agent matching service

When do you pay taxes after selling a home?

When you sell your home, you may have to pay both property taxes and capital gains taxes.

You’ll pay your property taxes at closing. Your total tax will be prorated from January 1 to the date you sell the property.

Capital gains taxes are due when you file your annual tax return — but you may be able to avoid this tax altogether.

» MORE: How to Avoid Capital Gains Tax When Selling a House

The tax code includes some generous exemptions for capital gains on the sale of a home. You can write off up to $250,000 in profit on the sale ($500,000 for married filing jointly) if you meet three tests:

  1. You’ve owned the property for at least two years.
  2. You used the house as your primary residence for at least two of the last five years (these years don’t have to be consecutive).
  3. You haven’t excluded the profits of another home sale in the last two years.

» MORE: Guide to Selling Your House After Just One Year

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