How long does it take for the seller to get paid after closing?

It goes without saying that the best part of selling any property is collecting the money. It’s the moment all your efforts have been building up to— finally, your investment pays off. You may have spent weeks or months in the sales process, and by now you’re probably already thinking about how to spend the money, perhaps even looking at another property you could invest in. But above all else, you’re probably wondering: How long does it take for the seller to get paid after closing?

Well, for most sellers: closing day is payday. Your profits can be in your hands before the ink dries on the last few documents. To make sure you can collect so soon, keep these tips in mind:

• An old-fashioned paper check is usually the fastest and simplest way to collect payment. A wire transfer can also be perfectly timely if initiated on the day of the sale. 
• Make sure the check reflects your net proceeds or the final amount you collect from selling the property after considering any mortgage payoff, fees, taxes, and any other conditions included in the seller’s settlement statement.
• The escrow or title company involved in the closing will send you the funds rather than the buyer personally releasing them.
• Last but certainly not least, collecting a same-day payment depends on the same constraint as so much else in the business world: scheduling on a weekday. Preferably, a Monday to Thursday closing date is ideal to avoid a weekend wait.

The Closing Process Explained

Closing is the culmination of the real estate transaction process, involving a series of critical steps that finalize the sale and purchase of property. It’s a meticulously coordinated event where legal documents are reviewed, signed, and exchanged, and financial dealings are concluded. This process ensures that the property’s ownership is legally transferred to the buyer, and the seller receives the agreed-upon payment, closing the loop on the transaction.

Participants in the Closing Process

• Sellers and Buyers: The principal parties whose agreement on the sale price and terms underpins the entire process. The closing signifies the completion of their transaction, with sellers transferring property rights and buyers assuming them.
• Real Estate Agents: Professionals representing both the buyer and seller, facilitating the negotiation, agreement, and often guiding their clients through the closing process.
• Lenders: If the buyer is financing the purchase, the lender plays a crucial role in providing the mortgage funds. They require various documents and assurances before releasing the funds for closing.
• Closing Agent or Attorney: A neutral third party, often an attorney or a title company representative, who oversees the closing process. They ensure that all necessary documents are correctly signed and recorded and that the exchange of funds complies with the agreed terms.
• Title Company: Involved in verifying the property’s title, ensuring it’s free of issues that could jeopardize the transfer. They often issue title insurance to protect against future claims.

Key Steps of the Closing Process

• Final Walkthrough: Usually occurring a day before closing, this allows the buyer to inspect the property and ensure it’s in the agreed condition.
• Review and Signing of Documents: Both parties sign numerous documents. For the seller, this includes the deed and bill of sale, while the buyer signs the mortgage and loan documents among others.
• Settlement of Closing Costs: Both parties settle any outstanding fees and costs associated with the sale. This can include commission fees, title insurance, and prorated property taxes.
• Funds Transfer: The buyer’s purchase funds, whether from a lender or their own accounts, are transferred to the seller. This may also involve paying off the seller’s existing mortgage.
• Recording of the Deed: The closing agent records the deed with the local government, officially marking the transfer of ownership to the buyer.

The Standard Payment Timeline for Sellers

When the pivotal moment of a real estate transaction—the closing—concludes, sellers are naturally eager to see the financial fruits of their sale. Understanding the nuances of the payment timeline post-closing is helpful for setting realistic expectations.

The Immediate Transaction Process

• Electronic Funds Transfer (EFT): The gold standard for expedience in real estate transactions, EFTs, enable the swift digital transfer of funds from the buyer’s account directly into the seller’s account. This method is preferred for its speed and efficiency, often resulting in the seller accessing their funds on the same day as the closing.
• Cashier’s Checks: In instances where EFTs may not be viable—due to the preference of either party or specific circumstances—a cashier’s check is issued. While still a secure payment method, the need to physically deposit the check and wait for the funds to clear can introduce a slight delay in fund accessibility. This delay varies depending on the bank’s policies but typically ranges from one to a few business days.

Timing and Its Impacts on Payment

• Closing Schedules: The timing of the closing meeting can significantly influence the payment timeline. Morning or early afternoon closings have the advantage, with banking operations still in full swing, allowing for same-day processing of EFTs or immediate deposit of cashier’s checks. Conversely, closings that edge into the late afternoon may miss the banking cutoff time, nudging the payment process to the next business day.
• Weekends and Holidays: The real estate world doesn’t operate in a bubble, and its timelines are intertwined with the broader workings of financial institutions. Closings that fall on or just before weekends and public holidays may see a delay in the processing of payments, as banks pause their operations during these times.

External and Banking Influences

• Method of Payment Preferences: Sellers have a say in the payment method and should communicate their preference for EFTs to the closing agent ahead of time to facilitate a smoother transaction. It’s also beneficial to understand the buyer’s constraints or preferences, as these could influence the chosen method.
• Bank Policies on Large Transactions: High-value transactions, characteristic of real estate deals, often trigger additional scrutiny by banks. This can include verification processes to prevent fraud, which, while essential, can delay fund availability. Sellers should preemptively notify their bank of the impending large deposit to expedite this verification.
• Navigating Delays: Awareness and preparation are key. Sellers can mitigate potential delays by scheduling closings earlier in the day and being proactive about bank communications. In situations where cashier’s checks are used, selecting a bank that offers immediate or expedited clearance on large checks can also be advantageous.

Now, there’s one key detail you need to understand when it comes to the time it takes for you to collect payment: the state you’re selling the property in.

Wet funding, Dry Funding?

First and foremost, you should check if you live in a “wet funding” or “dry funding” state. In a wet funding state, the mortgage lender makes the money for a purchase available at the moment the buyer signs loan documents; there is zero delay.

Keep in mind that some wet funding states may regulate the release of funds rather strictly, owing to the fast-paced nature of transactions. You should be sure that you meet any pre-funding requirements before you and the borrower sign any important documents; always read the terms and conditions carefully, in other words. For as unpleasant as waiting can be, it’s even worse if an emergency delay comes up at the last possible minute due to an unforeseen error.

Dry funding, however, gives the lender time to review the buyer’s documents before approving the loan. This bureaucratic process adds an unfortunate delay to the process, as money will not be released until the review is complete.

Forty one of fifty states are, by law, wet funding states. However, if you live in any of the following states…

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

… you may be in for an extended wait.

How Long Does it Take to Collect Payment in a Dry Funding State?

Thankfully, this delay doesn’t last forever. It could take up to four days, depending on factors such as the time of closing, the lender’s stringency in reviews, and so on. If you plan on buying another property immediately after closing, this could present a serious obstacle. If you live in a dry funding state, make sure to allot a few days’ time for the review process in between selling one property and buying another.

How Much Do You Get Paid Upon Closing?

You may have a few expenses to take care of between closing and your trip to the bank; unfortunately, the exact sales price generally won’t make it into your wallet. As noted above, make sure you check your seller’s closing disclosure against any possible discrepancies.

Your remaining mortgage balance is also a factor, assuming you don’t own the property outright. This is where the loan payoff comes into play. Of course, this isn’t an issue if you do own the property yourself. In such cases, the transaction may be marginally faster.

And, of course, closing costs can cut into your profits: these costs can reach as much as eight to ten percent of the final sales price, depending on the real estate agents and vendors involved in the sale. These costs are the composite of many smaller fees.

Costs Associated With Closing

Closing cost?	What is it?	On average..
Real estate agent commissions	Fees for real estate agents, on both buying and selling ends	Typically, agents from either side will collect about 2.5 to 3%.
Title search fee	The price of running a public records search to confirm your ownership of the property.	$150 to $400, depending on the local government.
Title insurance	Insurance protecting the buyer in the event of any issues involving the title	$1,000 to $4,000
Escrow fee	Payment to the closing agent facilitating the sale; buyer and seller generally pick up half each	0.5% of sale price
Transfer tax	A tax, separate from property taxes, charged by some states when transferring property ownership	Depends on the state
Outstanding amounts owed	Miscellaneous expenses, such as any property taxes or utilities prorated and paid up to the closing date	Widely variable, depending on local rates and when the sale is made

Sometimes, the seller agrees to cover some or all of the buyer’s closing costs. This can incur additional expenses of about two to five percent of the final sale price. This may include fees associated with appraisals, inspections, and the like.

Lastly, the elephant in the room..

When Do You Pay Taxes After Selling a Property?

Upon a successful sale, you may have to pay both property taxes and capital gains taxes. Property taxes will be paid at closing, and your total tax will be prorated from January 1st to the date of the sale.

Capital gains taxes are due during tax season. This is essentially a tax of appreciation: if your property appreciates in value between purchase and sale, your profits will be taxed.

The specifics will vary depending on your income, your marital status, and how long you owned the property for. However, you may be eligible for some serious exemptions.

Related Article: If you’re selling a fix-and-flip property, then you’ll want to read The Beginner’s Guide to House Flipping and Taxes.

How Can I Avoid Capital Gains Taxes?

It’s possible, in some cases, to skip paying capital gains taxes altogether! There are a few criteria, however.

• You must have owned the property for at least two years. 
• The property was your primary residence for at least two of the last five years (notably, these years are not required to be consecutive) 
• You haven’t used these exemptions to exclude the profits of a separate property in the last two years.

If you fit the bill, you may be able to exempt up to $250,000 in profit as a single person, or $500,000 if married and filing jointly.

Strategic Tips for Sellers to Speed Up the Sales Process

The speed at which you can access the proceeds from your property sale can significantly influence your immediate financial planning. To navigate this process with efficiency, sellers are encouraged to adopt a proactive approach. Here are detailed strategies to expedite the receipt of sale proceeds:

1. Prioritize Electronic Payments for Swift Processing

• Initiate the Conversation Early: As soon as the closing date is set, communicate your preference for electronic funds transfer (EFT) to the closing agent. This ensures that all parties are aware and can prepare accordingly.
• Ensure Accuracy of Banking Information: Double-check your bank account details before providing them to the closing agent. Incorrect information can lead to delays in payment processing or misdirected funds. Consider providing a voided check or bank letter as proof to eliminate any discrepancies.
• Understand the Process: Familiarize yourself with the electronic transfer process, including any potential fees or processing times specific to your bank. This knowledge will help you set realistic expectations for fund availability.

2. Leverage Timing with Morning Closings

• Optimize Closing Schedules: When coordinating the closing date, express a preference for a morning appointment. This timing allows the transaction to be processed within the same business day, increasing the likelihood of same-day fund receipt.
• Coordinate with All Parties: Ensure that the chosen time accommodates the schedules of all necessary participants, including the closing agent, buyer, and any legal representatives. Effective coordination can prevent last-minute changes that might affect the closing time.

3. Proactively Engage with Your Banking Institution

• Notify Your Bank in Advance: Contact your bank to inform them of the incoming large transaction. This preemptive step can help smooth the verification process that typically accompanies significant deposits, minimizing any potential holds on your funds.
• Discuss Hold Policies: Different banks have different policies regarding holds on large deposits. Discuss these policies with your bank to understand how they might affect your access to the funds. In some cases, your relationship with the bank or prior notification can lead to expedited access.
• Clarify the Process for Large Transactions: Ask about any steps you can take to streamline the receipt and clearance of large sums. Your bank may offer services or advice specific to large transaction processing that could further expedite your access to the sale proceeds.

By implementing these targeted strategies, sellers can significantly enhance the efficiency of the payment process following the closing of their real estate transaction. Opting for electronic payment, scheduling morning closings, and maintaining open lines of communication with your bank are key moves that can lead to a smoother, quicker conclusion of your property sale.

Closing thoughts

It’s never easy waiting on a paycheck, especially if you’ve invested heavily in the property. However, if you take the right steps, you can rest assured that it shouldn’t take too long. After all, no one enjoys the uncertainty of waiting— not even the lenders who may be dragging things out. Hopefully, you’ll soon be counting dollars, not minutes. 

Frequently Asked Questions (FAQs)

I want to count the money on closing day. How can I make that happen?

Of course, all this takes a degree of luck. Timing is never guaranteed, and getting through the closing itself can take longer than anticipated. In order to make sure the closing goes smoothly, you should plan to have all the following with you:

• A current, valid, government photo ID, such as a driver’s license. The standards may vary depending on your state. 
• All keys, garage door openers, and other items necessary to access the property
• Written records of any codes for locks, doors, thermostats, or other devices
• A cashier’s check for any closing costs, seller’s credits, or other miscellaneous expenses not paid out of the proceeds

You should also be prepared to review and sign the following documents on closing day:

• The deed, of course. This document officially transfers ownership of the property to its new buyer. 
• Likewise, the bill of sale. A list of any possessions, appliances, or other personal property included in the sale 
• Seller’s closing disclosure. An item list detailing the sales price, closing costs, the last mortgage payment, and how much money you’ll collect from the sale. You certainly wouldn’t want to forget that!
• Affidavit of Title. This legal document affirms your ownership of the property and discloses any legal hangups surrounding either you or the property. 
• Statement of closing costs. A disclosure stating that you understand the costs incurred on your end by the sale. 
• Loan payoff. A final statement from your lender showing the sum of your final payment, including any potential prepayment penalties. 

How does the seller get money after closing?

The seller receives their payment through one of two primary methods: an electronic funds transfer (EFT) or a cashier’s check. The choice between these methods is usually agreed upon in advance between the buyer and the seller, often with guidance from their real estate agents or closing attorney. EFT is preferred for its speed, directly depositing the funds into the seller’s bank account. However, if an EFT is not feasible, a cashier’s check is provided at closing, which the seller can then deposit into their bank account. The transaction is facilitated by the closing agent, who ensures that the sale proceeds are correctly allocated after deducting any outstanding mortgage balances or fees associated with the sale.

How long after closing date will the seller receive money?

The timeline for a seller to receive their funds can vary, with many sellers receiving payment on the closing date itself, particularly if the transaction uses EFT. 

In scenarios where a cashier’s check is used or if the closing occurs late in the day, the funds might be processed on the next business day. 

The timing largely depends on the agreed-upon method of payment and the operational hours of the banks involved. Depending on these factors, sellers should prepare for either immediate payment or a short wait of one to two business days.

How long can escrow hold money after closing?

The period during which escrow can hold funds after closing is dictated by specific post-closing agreements outlined in the escrow arrangement. Typically, this involves fulfilling certain conditions such as completing agreed-upon repairs or adjustments to the property that were negotiated during the sale process. 

The escrow hold period can vary, lasting from a few days to several weeks, directly correlating to the complexity and nature of the post-closing conditions agreed upon by the buyer and seller.

How long does a wire transfer take after closing?

Wire transfers are among the fastest methods for transferring funds after closing, generally completing within 24 hours of initiation. This expedited process is contingent on the transfer being initiated during banking hours and without any hitches in the verification process by the receiving bank. 

Delays can occur if the transfer is initiated late in the day or if the bank requires additional time for fraud prevention checks, potentially pushing the availability of funds to the next business day.

What is the difference between the closing date and disbursement date?

The closing date marks the official completion of the property sale, with all parties signing the necessary paperwork and the buyer gaining ownership of the property. 

The disbursement date, on the other hand, is when the financial transactions finalized at closing are executed, and the funds are physically distributed. 

While these dates often align, particularly in straightforward sales, there can be a delay in disbursement if additional verifications are required or if specific post-closing conditions need to be met before funds are released.

What is payment on the closing date?

Payment on the closing date entails the finalization of all financial transactions related to the sale. 

This includes the transfer of the buyer’s down payment and any mortgage funds from the lender to the seller, after deducting any closing costs, real estate agent fees, and outstanding balances on the seller’s mortgage. 

This process effectively completes the financial aspect of the real estate transaction, enabling the seller to receive their proceeds from the sale.

Can mortgage funds be released on the same day?

Yes, it is possible for mortgage funds to be released on the same day as the closing, particularly in transactions that have been meticulously coordinated and where all financial institutions involved are prepared for a quick turnaround. 

Same-day release of mortgage funds ensures that any existing mortgages on the property can be promptly paid off, facilitating the smooth disbursement of the remaining sale proceeds to the seller. Achieving this requires early-day closings and proactive communication with the lending institutions to confirm the timely release of funds.