Tuesday, April 22, 2008

Certified Checks at Closing

I just got yelled at, and likely lost a client, because [competitor's names deleted] don't require certified funds at closing.

We were acting as closing agent for a large Midwestern Bank located in the US (get it?). The buyer was getting ready to give me a $35,000 personal check at closing. Attorneys in Illinois and Iowa are required to obtain certified funds or wire transfers if they are planning to disburse before check clearance. Makes sense, don't you think? I wonder why the same isn't required of title companies. And even more curious, why would a title company even want to accept personal checks. [The good funds act now requires this.]

Sure, most people's checks will clear. Ignore for the moment those that don't. Banks now put a three to ten day hold on personal checks before the funds are available. That means, if a closing agent disburses at closing or shortly thereafter, they are disbursing money that belongs to someone else. The money for that transaction won't be available for a week or more, but here they are ponying up money that belongs to someone else. At some point, that little house of cards is doomed to collapse, whether it's because there is not enough float, or funds don't arrive on time, or business slows down to the point they don't have enough money to cover YOUR closing.

The excitement which would ensue for a check which did not clear really does not require discussion.

I asked the buyer on which bank the check was drawn, hoping it was nearby so she could just zip over there to get a certified check. She told me it was Bank A, and passed a check over to me drawn on Bank B. I pointed this out, and she rifled through her purse and announced that she did not have the checks with her for Bank A--the bank where money was located! So, yes, her check would have bounced. I try to follow the rules, and I get yelled at and lose a client.

So, I put it to you: Would you want to have your closing for your purchase or your sale at a closing agent's office who accepts personal checks and is using money that belongs to someone else to fund your closing? Or would you prefer to close at a title agent who diligently obtains good funds from all parties so there are no, um, "complications" which can occur when it is time to divvy up the money?