We get this question all the time from both buyers and sellers: How long does it take to close a home?
The average timeframe to close a transaction is between 45 to 60 days.
Now, there are many factors that can affect a closing date. The biggest one can be the type of financing that you’re doing on a property. FHA or VA financing can take longer than conventional financing; there are longer and more stringent requirements for the appraisal and underwriting processes.
With FHA and VA financing, the appraiser will dig a little deeper than normal to make sure that everything is taken care of on the property, so that the buyer can move in without being burdened with repairs.
Another kind of buyer you’ll see is a cash buyer or investor. These buyers may able to close within 10 days. We’ve even seen investors come in and ask the seller to pick a closing date, which is a great option for some sellers who need the flexibility of a closing date that works for them. As long as the other terms work for an investor, you can see the time to close vary between 10 days and six months.
“In closing a home, there’s a life cycle to the process.”
Once the buyer wants to put a purchase agreement on a property, the buyer and seller go into a negotiation period. This can range from an hour to as long a week or more. Our market moves pretty fast, so buyers have to step up to the table quickly, especially if it’s a newly listed property.
At the point when a purchase agreement has been ratified, the buyer and seller move into an inspection contingency phase, which can last anywhere from 10 to 14 days. This is the time for the buyer to do their due diligence on the property and complete the buyer’s inspection. Sometimes they’ll inspect for radon, or perhaps a sewage or well inspection. If you’re building, there are different due diligence inspections as far as permits, etc., and we can walk you through that process.
After the inspection contingency is released, if it’s a financed property, the next stage is the appraisal process. At this point, the bank is going to hire a third-party appraisal company to come out and verify if the price on the home truly reflects market value.
During the appraisal process, title work is likely being done at the same time. In the state of Minnesota, the buyer hires a title company to go through and make sure that the property they’re purchasing is free of all title defects and they can buy it without any encumbrances.
Following the title work, the buyer moves into the final underwriting period, which can last from a couple days to a couple weeks. Sometimes, lenders will need an updated copy of a pay stub, or they’ll have a question about the appraisal; lenders sometimes return to the buyer a few times, asking for updated items.
Once everything is done and the lender has dotted the I’s and crossed the T’s, they’ll then release what is called the Cleared to Close letter (CTC). Everyone is happy at this point because they know that the loan is through the underwriting process and the buyer is ready to close. The buyer may do a last walk-through before all parties meet to close.
That is what the process will typically look like from purchase agreements to end, and on average lasts 45 to 60 days.
If you’re a buyer or seller and you’re thinking of making a real estate transaction in the Twin Cities area, call us anytime!
