SPECIAL FEATURE: Spotlight on Settlement
Good for the Money
by Linda Wagamon, Escrow Coordinator, Investors Title
Closing funds can come in many forms, and it is important to ensure that immediately negotiable “Good Funds” are received and credited to the escrow account prior to disbursement. Some examples of “Good Funds” include: Wires; Certified Checks; Cashier’s Checks; Checks Drawn on the Government of the United States, an Individual State, or an Agency of the U.S. Government; Collected Funds.
While earnest money deposits do not need to be immediately negotiable “Good Funds” to be accepted, no disbursements can be made until the funds have had sufficient time to clear the escrow account and become “Collected Funds.” Clearing times vary, however, so it is important to confirm with your bank the specific time it will take for the check to clear your account.
It is also important to understand the differences between an ACH (Automated Clearing House) deposit and a wire. ACH deposits can take 3-5 business days to clear. During this time, a customer may recall or “claw back” the ACH, so ACH funds should be held and treated in the same manner as checks. ACH deposits (like checks) can still be debited from the escrow account, if deemed fraudulent, 60 days after deposits. Also, you should check your organization’s and bank’s policies on acceptance of ACH funds as some bank accounts do not accept or may have a block established on ACH deposits. [Virginia Title Center does NOT accept ACH funds.]
Wires are the preferred method for transferring closing funds. Incoming wires are Good Funds once the incoming bank has received the wire. Be sure to require the sender to include the buyer/seller/ property information related to the transaction on the wire when they send it. Doing so will help identify any wires received while ensuring they are posted to the correct transaction. Due to the prevalence of wire fraud, be sure to follow your organization’s procedures and preventative measures, such as ensuring that all wire instructions are sent via encrypted email or fax and requiring the verification of all wire instructions at a known phone number.