Wire Transfer or Deposit a Cashier's Check for Home Closing

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Question: Should We Do a Wire Transfer or Deposit a Cashier's Check to Close?

A reader asks: "We are first-time home buyers closing the sale on our first home next week. The title company says we must provide certified funds to close. They said we could either bring a cashier's check to closing or we could do a wire transfer. I don't have time to go the bank to get a cashier's check, but my wife says if we wire funds, the money might not get to the title company in time. Should we do a wire transfer or deposit a cashier's check to close?"-- Nervous Home Buyers

Answer: Excellent question, Nervous Home Buyers. Let's address two popular myths about cashier's checks and wire transfers. The first is that a cashier's check can't bounce. Yes, they can. Cashier's checks can be altered by crooks or reversed by the account holder. The second is that wire transfers are instantaneous. Wire transfers take time.

How Do Cashier's Checks Work?

An account holder goes to the bank in person, provides identification and requests a cashier's check from the bank teller. You need to have cleared funds in your account to get a cashier's check. Here is what the bank teller does:

  • Requests the payor / payee names and dollar amount from you.
  • Checks your I.D.
  • Verifies that you have the money in your account and all deposits have cleared.
  • Draws a certified cashier's check with your name and the payee's name.
  • Signs the cashier's check.
  • Hands you the check.

Depending on your relationship with the bank, the bank may charge a small fee for drawing the cashier's check.

How Do Wire Transfers Work?

A wire transfer used to be delivered via telegraph, but most banks submit wire transfers electronically these days. The service many banks use for secure financial messages is called S.W.I.F.T. It stands for Society for Worldwide Interbank Financial Telecommunication.

  • You can ask your bank to do a wire transfer in person, over the phone or, in some cases, on the Internet.
  • Depending on the bank, funds may need to be wired to a corresponding bank, which can delay receipt.
  • Many banks send out wires at certain times of the day, and you could miss a cut-off time.
  • The wire may need to be approved before transmission.

Which is Better -- a Wire Transfer or a Cashier's Check?

Don't you wish that you could walk into your home closing with a big ol' sack of money and dump the cash on a desk? But you can't. Closers don't want the liability associated with that much cash. Moreover, transactions that exceed $10,000 in cash must be reported to the I.R.S.

Obtaining a cashier's check can present several problems.

  • Some banks require advance notice before they withdraw a large sum of money and give it to you.
  • Check with your bank before you need the money.
  • You may need to deposit the funds with the closer the day prior to closing.

Wire transfers can present drawbacks as well.

  • The wire transfer can get lost.
  • Numbers can be transposed.
  • You can miss that day's deadline for wiring, and it won't go out until the following day.
  • The manager who needs to approve the wire could be out.

Why Closing Agents Insist on Certified Funds to Close

Title companies, escrow officers, and other closers can't record a deed until the equivalent of cash is in hand.

They represent both the seller and the buyer. They promise that the seller will receive the money when the deed is recorded. They promise to record the deed when the buyer deposits the money.

The laws from state to state can vary. For example, California Insurance Code Section 12413.1 regulates the disbursement of funds by title companies. Here are the main requirements:

  • Funds must be deposited and available prior to disbursement.
  • Funds received via wire transfer may be paid out immediately.
  • Funds received via a cashier's check need to be deposited the day prior to disbursement.
  • Funds received in any other manner will delay disbursement.

TIP: One very important thing to remember when sending in funds to close is to make sure the funds are coming from a source that has already been verified by your lender.

In other words, don't decide that in the interest of time, perhaps because you are traveling or otherwise incapacitated, that it's OK for, say, your parents to send a check in to closing and you'll pay them back later. No, no, no. Make sure the source of your funds is an account your lender has verified or you may not close on time.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.