An increasing number of problems with cashier’s checks have some title companies revising their requirements for cashier’s checks and the delivery of funds needed to close a sale.
Many title companies may now require buyers to wire money to them if the amount is substantial. Some have set the limit for cashier’s check at $5,000, while other title companies may accept them up to $50,000.
Fraudulent Cashier’s Checks
Title companies are not always able to bank on a cashier’s check being a source of good funds at the closing table. While cashier’s checks have long been regarded as cash, the incidences of fraud and forgery have been rising.
Criminals are very aware of how banks handle check deposits and they use it to their advantage. When presenting a cashier’s check, most people believe the funds are available immediately to the title company. Generally, the bank must make the funds available by the next business day.
A bank may place a hold on a cashier’s check if they have reasonable cause to believe the check is not good, or if it was made to an account open for less than 30 days.
Some banks have a daily limit on funds available from a cashier’s check. Individual banks may have different policies on any hold placed on deposited funds.
A counterfeit cashier’s check may clear immediately when first deposited. However, when the bank determines that the check is fraudulent, they take the money back. This can happen days or weeks after the deposit.
Good Funds
Money needed for closing your purchase must be in the form of guaranteed, good funds. Good funds to purchase a property are regulated both by the Code of Federal Regulations and the Texas Department of Insurance. The title company has the discretion to determine which good funds it will accept. Usually, a wire transfer is the ideal way to deposit money. When the funds are delivered by wire, they are confirmed immediately.
Personal checks are generally not accepted at the closing table for any amount over a few dollars. They are not considered reliable forms of payment and the title company has no way to verify that the check will be honored when it is presented to your bank. Personal checks take up to 10 business days for confirmation that the check has cleared and there is no chance that it can be taken back, reversed, or have payment stopped. That is a prohibitively long amount of time for the typical closing.
Avoid Delays
The closing/escrow officer will give the buyer specific instructions regarding how to deliver the funds to close. It is best to plan the delivery of funds a day before the closing date to avoid delays. If wiring the money is required, the wire should be initiated by noon the day PRIOR to closing. A ‘same day’ wire transfer may not arrive at the title company until after 5 p.m.
There are many tasks happening at the time of closing, in theory, all at once. The buyer’s funds are added to their lender’s money at the title company which is used to pay off the seller’s mortgage, give the seller their proceeds and pay the other parties in the transaction.
At the same time, the seller and their current mortgage company give up their rights to the property. Deeds are filed and possession/interest in the property changes from the seller and their mortgage company to the buyer and their mortgage company. This cannot happen until the title company has everything needed to close, the most important item being the money.
While a cashier’s check is regarded as one of the most secure forms of payment, they are simply not risk-free. More title companies are requiring wire transfers for large amounts. Buyers should always check with the title company first, as bank wire transfers have currently become the preferred method of delivering title company funds.
The opinions expressed are of the individual author for informational purposes only and not for legal or financial advice. Contact an attorney or accountant for any particular issue or problem.
