They say that “cash is king”, but not in Real Estate. Certified funds rule here.
It is not uncommon for a borrower to whip out the ol’ checkbook at the closing table to pay their closing funds. Just as they start to write I say “sorry, we cannot accept personal checks…” And then the look of disappointment and frustration comes over their face as I tell them “we have to have certified funds.”
Sellers, title companies, and lenders tend to not take “I promise it’s good” as the certification of funds. Forms of payment accepted at closing are: cashiers check, money order,
or wire. Never cash. Your lender will have to check the source of your funds to make sure they came from you and have cleared your account. Remember to make sure the funds are made payable to the closing agent, not the lender or seller or anyone else.
If you are planning to send a wire, please contact your closing agent and request a copy of their wiring instructions. But before you send a wire, call the closing agent to verify the instructions over the phone. This may seem like an extra step but fraud is on the rise and emails have been hacked and false wire have been sent all across the county. I’d rather be safe than sorry, and if you send funds to a fraudster there is a strong chance that you will not get your money back. And not only will you lose your money, you may lose your chance to purchase a home.
Think of each transaction as having its own short term bank account where 100% of the money that goes in, comes out. In order to complete the transaction, one of the settlement agent’s roles is to ensure that all the funds coming into the transaction have been collected and are good. No one wants to wait for a check to clear, and often times cannot wait as time is of the essence in many transactions.
For earnest deposits a personal check could be used, but not encouraged. And again, never cash.
Tip: If you are relocating to a new city or area, check to see if there are branches of your bank nearby. If not, contact your bank prior to your move to ask how you can initiate a wire transfer from online or over the phone.
We have had clients call their banks from the closing table only to be told their account is not set up to do a wire and the only option is to pick up a cashier’s check from the branch. One client had to drive from Kansas City back to Omaha, NE and another drove to St. Louis.