How to make sure you have "good funds" for your real estate closing
Wire transfers are a very common aspect of the real estate settlement process. But for many consumers, the purchase of a home is their only exposure to wire transfers, which can lead to confusion and unnecessary stress.
To clear up any confusion and to help prepare our clients for settlement, here is rundown of some of the questions we hear and things to consider regarding wire transfers.
I wired directly via my bank’s website and money has left my account – why don’t you have it yet?
This is a question I have gotten more than once. Did your bank charge you a fee for this "wire"? The answer to this follow-up question, is usually "no" or "I paid a small fee." What your bank may not be telling you is that you are actually ordering an ACH (Automated Clearing House) transaction and not a wire directly from your bank to our bank.
You will need to check in with your bank prior to sending out funds to make sure the fee you are paying is for sending a wire and not a fee for an expedited ACH. Our bank will not accept ACH transactions for the purchase, because the ACH funds are not considered good funds.
Why aren’t ACH funds "good funds" for purchasing my home?
An ACH goes through a clearing house. Because these are bulk transactions, the funds are not "liquid," or immediately available funds. ACH funds can be adjusted, changed or recalled by the clearing house without authorization from the accountholder. In general, our bank will not accept ACH funds for any of our accounts.
Can I write a personal check?
The short answer is no. Personal checks are not considered immediately available funds. Unfortunately, not all personal checks are good when they are written – either by mistake or by design, clients sometimes fudge that funds are available. There are occasions when we can accept a personal check for a small amount of funds at closing.
What are "good funds" for closing?
A wire, cashier’s check, or a certified check is considered good funds. A wire is considered good funds because the funds are wired from your bank directly to our bank via the Federal Reserve and are immediately available. Another example of good funds would be a cashier’s check. These funds are immediately available from the bank.
A certified check is not often used as a vehicle for funds, but is still acceptable. A certified check is a personal check that has been stamped and certified by a bank official the funds are available in the account. The bank then make sure those funds are only good for that purpose. Banks rarely issue certified checks, as it is much easier to issue a cashier’s check.
So, how do I make sure I have "good funds" for closing?
All banks are different. Have a conversation with your bank early in the process. Find out what your bank needs from you to wire funds. Ask your bank if there are any fees involved to wire funds and how much lead time the bank needs for getting funds to closing on time. Also, make sure you coordinate with your settlement agent and lender to ensure you have the correct bottom line and have the amount of funds to close readily available prior to closing.
Taking these steps early really help to make the buying process a little less stressful.