Good funds, as experienced real estate practitioners know, are funds that are guaranteed to be available on demand. They are equivalent to cash in that they are a medium of exchange that is unquestionably valid and immediately usable. Unlike personal checks, which need time to be cleared by the check-writer’s bank, good funds are accepted as full and immediate payment. The absence of good funds at a real estate closing may significantly delay the transaction.
Good fund laws, which are applicable to real estate transactions in most states, prohibit a lender - and its agent, the title company, the escrow company and the closing attorney - from recording a lien against the borrower’s property before the full amount of the proceeds of the loan have been satisfactorily delivered. This ensures, among other things, that the transaction is funded; that any lien that is to be paid from the proceeds of the loan will be paid with funds secure for disbursement.
Each state sets forth the forms of payment that qualify as ‘good funds’ in that state. Typically, they are:
- Cashier’s checks
- Certified checks
- Bank checks drawn upon a federally insured bank, credit union or savings and loan
- Checks from a government agency or municipality
- Wire transfer checks where verification of receipt has been established
- A personal check to cover any variance between the estimated and actual closing costs (usually no more than $500 to $1,000)
Agents should bear in mind when scheduling back-to-back closings that even wire transfers take time to be recognized by the receiving bank and may take four hours or more from the time sent to the time they are officially received. Also, rising instances of wire fraud are necessitating an abundance of caution for everyone involved in a real estate transaction.
As your title partner, we work diligently to facilitate every closing transaction in a timely manner and to provide the required calculations to all parties as early as possible. As an educated agent, you know that managing expectations for both the buyer and seller in this regard can help make closing day as rewarding an experience as possible, even as you comply with all the necessary funding regulations.
Closing day is exciting. But it can also be stressful. Good fund laws - and cooperation by all parties - can help ensure that funding and closing proceed smoothly.
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. Published with permission from RISMedia.