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  • Mary Anne Harris

Is it really "good funds?"

Educating Clients about Good Funds Can Prevent Delays at the Closing Table


The escrow process in a real estate transaction is a very precise and complicated business, not to mention that it is highly regulated by each state’s department of insurance and monitored by the agent’s title insurance underwriter. Consequently, there are lots and lots of rules about what an agent can and cannot do.


One of the most important rules is the idea of “good funds.”


Most state insurance regulations include a requirement that a title company have in possession the funds needed to close a real estate transaction and disburse all of the required payments, which include paying off the previous owner’s mortgage, paying commissions, forwarding payments for insurance policies, disbursing funds for all lending services, and taking care of taxes, HOA fees and recording fees.


Real estate agents don’t always understand what good funds actually means, and the impact it may have on a transaction, so it’s imperative that you share this information with your clients.


What are good funds?


Simply put, good funds are monies that have been cleared by the bank as being in hand and available for disbursement.


Your real estate agent clients, and your homebuyers and sellers, must be educated on what kinds of payments and fund transfers are the safest, most reliable, and quickest way to ensure good funds are available for the closing.


Here is a little tutorial you can provide your clients to help them understand why funds must be provided in a certain form to ensure the closing moves forward.


Wire transfer


Wire transfers move money electronically from one bank account to another. The advantage of using wire transfers is that they are fast, and the money is immediately available once it has been received and confirmed by the bank. This is the preferred method of transferring funds in a real estate transaction. Wire transfers are normally not reversible, which is the primary reason they are considered good funds.


Cashier’s check


Cashier’s checks are often accepted in real estate transactions because they are considered a safe form of payment since the issuer holds the funds until the check is cashed. However, it is important to remember that cashier’s checks must be cleared before the money is available – a process which takes two to three days. In some cases, it may take up to a week and can therefore cause a delay in the closing.


Personal and certified checks


Personal and certified checks come directly from a homebuyer’s checking account and therefore do not have the same guarantee as a cashier’s check. Because it may take several days for these checks to clear, it is generally not an acceptable form of payment at a real estate closing.


ACH transfers


Automatic Clearing House (ACH) transactions or online transfers are not acceptable methods of payment because they can be reversed by the sender. Most state regulators no longer permit title companies to accept ACH payments because of the inherent liability.


Effective communication is a critical element of a successful real estate transaction, especially where fees and payments are concerned. As we launch into a new year, it might be an opportune time to review all of your important communications efforts – including flyers, documents and emails – to ensure everything is up to date.


At Positively Balanced, we are always eager to sit down with our customers to see how we can improve communications, streamline our shared processes, and add value to your company. Contact us today to learn how we can enhance your business plans for the coming year.

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