In the post below, we will go over each step of the cash home purchase process in Arizona. Although this article is specific to the process in Arizona State, this blog can also be helpful for those wondering about the step-by-step process in other states.
Step One – Proof of Funds
Through the process of cash buyer purchases, the most important step is reviewing proof of funds. Lending your time to a cash buyer means that you are entrusting this buyer to provide an honest and fair transaction for your home. Proof of funds is a type of financial documentation provided by a bank letter or statement, or letter from an escrow company. The proof of funds is to verify that the buyer who wants to buy your property has enough liquid and existent assets to pay for the cash home purchase. Sellers in Arizona are required to ask for proof of funds from a buyer, as it protects both parties from being accused of dishonest practice or fraud. Any official statement from a bank or confirmation of escrow is a great and common choice for proof of funds.
Step Two – Making a Cash Offer
Cash offers are structured in Arizona by the guarantee of speed, simplicity, and a promise to the buyer that their property is certain to be sold when the offer is accepted. No financing or appraisal work is needed, as cash buyers do not need lender approval or any sort of traditional appraisal. When making a cash offer, the seller will provide all the important details needed for property information. Common details include the condition of the home, the age of the home, and in Arizona, the age of the AC system and the roof of the home. Once the assessor gets the details, an appointment to see the property will be scheduled. Depending on which cash buyer program is chosen, the offer will follow within the next 48 hours, most of the time showing up within the first 24 hours. If the seller agrees to the terms of the offer, a purchase agreement is signed and escrow opens. Overall, sellers are more likely to accept cash offers faster than traditional market offers. The speediness of the cash sale and offer often has to do with how fast a seller decides on a cash offer.
Step Three – Opening Escrow
Escrow is a necessary process where a neutral title/escrow party holds onto all the funds (all the buyer’s money involved in the sale), along with all documents such as the deed to the home, until the purchase agreement is met on all conditions. This ensures that all parties receive an honest and fair transfer of the property and funding. Opening the escrow process is crucial, along with proof of funds, as it ensures that the assets of both parties are protected while the purchase agreement is still in progress. Without enlisting an honest, reputable escrow company, there is always a risk of improper handling of assets or the purchase agreement not being followed thoroughly.
Step Four – Inspections & Due Diligence
In the case of a cash home purchase, home inspections are optional. Of course, a home assessor will come to the property to check it out overall, as that is how they draft a bid price on the property. Separate inspections instigated by the seller, including foundation, roof, or systems inspections, are completely optional. In all & any Arizona cash home sales, the seller must provide their buyer with a Seller’s Property Disclosure Statement, which discloses all known issues and property history. Material defects such as roof problems, insect or rodent invasions, plumbing problems, or foundational issues must be disclosed to avoid any liability problems. Anything that could affect the value of the property being sold must be reported in the SPDS. Within the due diligence of the home purchase, if there are major issues to be revealed, buyers may negotiate repairs. Negotiations could include asking the seller to fix the issue or negotiating a price drop. If a seller says no to the negotiations, a buyer can walk away.
Step Five – Title Search & Title Insurance
When escrow begins, a title search begins as well. Title searches are detailed views of public, acquirable records that confirm the seller has a legal right to sell the property in question. Title searches confirm there are no hidden issues attached to the home as well. The overall goal of title checks is to confirm the title is good and transferable before the sale and ownership transfer.
Title Companies Check For:
- Entirety of ownership history
- Homeowner’s Association liens or debts
- Outstanding mortgages or liens
- Overdue property tax balances
- Judgments, collections, or other legal claims
- Restrictions affecting the use of the property
Title searches are a must in cash home purchases, even without a lender involved. It falls under both the due diligence of the purchase and the escrow process. Without the title search, buyers have the potential to inherit debts or liens tied to the property, which could prevent resale of the property or financing issues later on, and ownership disputes may surface after the closing of the sale. In the state of Arizona, all title issues must be finished before the closing of the sale. It does not matter if the deal is a cash sale or on the market. In the case of title issues being found during the search, the escrow process will stop until the issue is completely resolved. Before the process resumes, the seller may have to clear judgments, pay off all liens, and resolve all owner discrepancies. Most of the issues with the title that come up can be fixed easily, especially in cash sales.
Step Six – Closing of the Cash Sale
The closure of the cash home purchase is the final step and is easy as well. All documents are signed off, the funds are released to the seller, and the ownership officially transfers from the seller to the new buyer. The title and escrow company will prepare all the paperwork: a settlement statement that shows every single cost and credit, a deed transferring the ownership officially, and affidavits and disclosures that are required by state law. The buyer and seller will review all documents before signing. Luckily, the signatures can happen either in person, by a mobile notary, or if the situation permits it, remotely. After the signing of all paperwork, the buyer will send the full amount of funds to the escrow company, usually but not always by a wire transfer. If the funds are not cleared or verified before closing, it cannot occur. Once all the documents and funds are deemed good, the deed is then recorded with the county. The escrow company forwards and records the deed with the county recorder, and the ownership is legally transferred to the buyer.