Here we are on All-Hallow’s Eve, so I witch you a Happy Howl-o-ween. If you work in the real estate industry, you have come to accept, warts and all, the current practice requiring buyers to wire the balance due at or before Closing. The need for this requirement arises out of the “I need it now” demands of today’s society. Superstitious of that full moon, Saintly Seller does not want to wait at the Closing table for any hocus-pocus while Boo-tiful Buyer’s lender reviews the executed loan documents and issues a disbursement authorization. Saintly Seller – having far fewer documents to sign than Boo-tiful Buyer – is anxious to sign, fire up the broomstick, and fly away. There are pumpkins to carve and treats to give out.
In order for Saintly Seller’s proceeds to be immediately available at Closing, Boo-tiful Buyer must deliver to the Closing Agent the balance due (and the lender must deliver the lender’s loan proceeds), in immediately available funds. Back in the day when wires were not as prevalent as they are today, Boo-tiful Buyer might have brought to Closing a “bank check”, a “teller’s check”, or a “certified check”, and Saintly Seller would walk away from Closing with an Attorney’s Trust Account check (good as gold, right?).
Now, Florida law requires that a title agent may not disburse funds unless the funds are “collected funds.” No alchemy allowed. “Collected funds” means funds deposited, finally settled, and credited to the title agent’s trust account. Hence the need for wires, so that the funds in the title agent’s trust account at disbursement are “collected funds,” and available for immediate disbursement at Closing.
Seems simple, yes? Well, no. Most financial institutions (i.e., “banks”), and some title agencies, charge a fee to wire transfer money; between $10 and $35 per transfer at some places (NOTE: our firm does not charge a fee to either receive or send a wire). Since its Halloween, Boo-tiful Buyer thought it might be just the occasion to prank the “system” and fund the balance to close in another way: an ACH transfer. “Double, double, toil and trouble; fire burn and cauldron bubble” – an ACH transfer is NOT the same as a wire! Think of an ACH transfer as the coach that could turn into a pumpkin.
An ACH transfer is an electronic, bank-to-bank money transfer that is processed through the Automated Clearing House Network (“ACH”). Sounds like a wire, but isn’t. When Boo-tiful Buyer attempts to send an ACH transfer in place of a wire, the funds are not considered “collected funds”. An ACH payment can be recalled without the consent of the recipient (much like putting a stop payment on a check); by contrast, a wire cannot be recalled without the recipient’s consent. The last thing the parties need is an ACH payment being recalled just a few moments after the deal is “Closed”. That would be ghoulish, and cast a real spell on the festivities.
Furthermore, an ACH transfer can take 2-3 days for the recipient to actually receive the funds. If Boo-tiful Buyer attempts an ACH transfer the day before Closing, it likely will not be received in time for Closing. An ACH transfer provides only “provisional” credit – until it clears and cannot be recalled. Moreover, the receiving bank account must be specifically set up to receive an ACH transfer (most trust accounts automatically reject ACH transfers). The sending bank also has limitations on sending ACH payments. Unlike the real-time processing of wire transfers, ACH transfers are processed by a network operator in batches only three times a day. The ACH network only processes transactions Monday through Friday, and delivery can take several business days.
Don’t be tricked into using an ACH payment in place of a wire; it could haunt the transaction and put the Closing at risk. BOO! If funds are not immediately available (i.e., “collected funds”), then the title agent cannot disburse and Saintly Seller does not get paid, nor does the agent, or the mortgage being paid off. When someone suggests that an ACH is the same as a wire, be spooked. Stay out of the cauldron; an ACH is the popcorn ball nobody wants. Use a wire – it’s the extra-large peanut butter cup everyone loves!
As always, should you be haunted with regard to wires, deposits, or funding, we urge you to come in for a spell or consult with your local real estate attorney, for additional guidance.
Mark C. Hanewich, Esq.,email@example.com
Berlin Patten Ebling, PLLC
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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