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Title Insurance: Real Estate Transactions and Wire Transfers

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As the real estate settlement industry hustles, and struggles, to catch up with the pace of technological advances (i.e. quicker closings, remote settlements where neither the Buyer nor the Seller attends the settlement table, etc.), one of the biggest changes is the transition from the old standard of allowing realtors to bring their business checks for the deposits, and Buyers to bring certified checks or cashier’s checks for the funds that they need to close, to requiring all parties wire their funds to the title insurance agency before closing.

Showing my age, in the “old days” the realtors would bring the Buyer’s deposit in the form of a regular check from the real estate office, the Lender would bring a regular check for the mortgage loan proceeds, and then the Buyer would bring a regular check for his/her/their proceeds necessary to fund the entire settlement. So long as the regular checks cleared, that system worked as there was always a “flow” with the banks as the title insurance agency deposited all of these checks, issued checks to the Seller for the proceeds, and to the mortgage company for the payoff, and all of these checks “passed each other” and cleared. Every once in a great while, this informal system was disrupted by a check that was returned for insufficient funds.

Eventually, the title insurance industry started requiring that Buyers bring certified checks (i.e. a representation from the bank that the check, when written, was covered by funds in the writer’s account when the check was written). Unfortunately, just like a lot of things in life, some “bad guys” ruined it for everyone else by passing a certified check but then closing the account upon which it was written, and removing all the funds to cover the check, before anyone could react. The title insurance industry then started requiring the Buyer’s bring cashier’s checks (i.e. a check from the bank that is covered by actual funds in the customer’s account and those funds are “taken” out of the account by the bank).

The use of a cashier’s check actually worked for quite a while until met with the changing technology and speed of transactions that we all now face…settlements are happening much quicker nowadays, and, more importantly, mortgage lenders, and even some realtors and Sellers, are now insisting more frequently on their proceeds being wired into their accounts. In order to process that wire, the sending bank needs to have all of the funds in the account…no more “floating” regular, certified or cashier’s checks. A common misconception is that the deposit of cashier’s checks is considered immediate funds…some banks do not treat cashier’s checks as immediate funds. As the result, the bank will not wire the funds that have been deposited through a cashier’s check for at least a day. This creates a problem that must be addressed by the parties to a real estate transaction, sooner rather than later.

In our experience, the best way to handle the above is to insist that all parties to a transaction wire their portion of the funds to the title insurance company a day or so before closing. That requires that all parties to a transaction (i.e. Buyer, Seller, Realtor, and Lender) work closely with the title insurance agency and it requires that the latter be organized, efficient, and proactive. The Lender should no longer bring a check to the closing table…it should wire the loan proceeds to the settlement table the day before closing, during closing or immediately thereafter. The Buyer should work closely with the title insurance agency, and the Buyer’s Lender, to determine how much the Buyer needs to bring to make closing, and that figure should be wired a day or so ahead of the scheduled closing. Finally, the realtor should wire the proceeds of the Buyer’s deposit either the day before the closing, or immediately prior to closing on the day thereof, to make sure that those funds are available. If all of the parties work together, in an organized and proactive fashion, the above, while sounding daunting, can avoid problems, allow the wiring of mortgage payoffs, Sellers settlement proceeds, realtor commissions, etc.

OWM Law offices provide title insurance, and settlement services, and we work on the above with our “partners” and referral sources (i.e. realtors, mortgage lenders, etc.) to achieve a smooth settlement. Please contact OWM Law offices to discuss your real estate sale and/or purchase needs.

— Written by David A. Megay, Esquire

DISCLAIMER: The contents of this blog are not legal advice, and are not to be used for that purpose.  If you are faced with a legal matter, you should contact a lawyer immediately in order to ensure that you are protected.

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