--Jeff Foxworthy, "You Might Be a Redneck If..." One time the bank repossessed my car because I didn't make a payment on it for a little over a year. A man showed up at my door and said,"Mr. Foxworthy, if you don't give me $500, the Camaro is going with me." I got mad. "Five hundred dollars? Who keeps that kind of cash around?" "You mean you can't write me a check?" "No, I can't...a check? Oh, I thought you wanted MONEY."
Growing up, when I heard Jeff Foxworthy, I couldn’t help but chuckle. It was so relevant to my hometown (Perry, FL). As funny as this Jeff Foxworthy snipet is, it is actually a pretty common occurrence in the Real Estate industry. More often than not, the biggest detail in the home-buying process is overlooked…. the cash-to-close.
Sometimes, real estate transactions can have so many obstacles that by the time everyone gets to the closing table the last thing anyone is thinking about is how to pay for this house. Literally, customers banks will be clear cross country and not once did they consider HOW they’d access those funds when it came time to close. It just seems like such a far-off issue when you are barreling down the path of inspections, appraisals, and negotiations. But what people fail to consider is just how crucial this piece of the puzzle is.
So what can you bring to closing? Acceptable forms of payment at closing are a cashier’s or certified check issued by the bank, or a wire transfer. But, why? Funds at closing must be as good as cash since the title company will be disbursing out all the funds received by the lender, buyer, and sometimes seller. Personal checks over a certain (very low) amount tend to be held by banks 7-10 days for processing to insure posting. Since the title company is issuing large checks at closing, they cannot wait that time post-closing for personal checks to clear. And it is unlawful to write checks without sufficient funds to cover them, i.e. kiting.
In order to insure a smooth closing experience, it is extremely important that this method of payment is discussed at the very beginning of the transaction so that there aren’t any surprises at the closing table. Many banks, and credit unions, will not allow wire transfer requests over the phone due to all of the wire fraud. Often times, customers think they can just call their bank and have them send the funds. While this has worked in the past some, it typically doesn’t work. Customers often think they can wire transfer from their online banking. While many banks offer this to customers through online banking, the fine print should be read as typically there is a 2-3 business turnaround (or longer) for the funds to actually process. In addition, there are typically limitations on the amounts allowed to be transferred online.
It is especially important that parties are prepared to properly deliver their funds AT closing per the terms of the contract. While many sellers are understanding about mishaps, many are not, and they expect their check when they sign the deed to their property relinquishing ownership. All it takes are a few questions to insure a smooth closing for all parties. Make sure your customers are ready and informed for what is expected of them. When in doubt, call your title girls for help! 🙂