Issuance of Paper Checks at Closing

With recent technological advances, many banks now offer their customers the ability to deposit checks using their smart phones. One can now simply take a picture of a check using a smart phone and  instantly deposit it into their bank account. While this is certainly a convenient feature, it has created quite a challenge with respect to the issuance of checks at closing. The reason being is that once a check is provided to a party, the closing agent is now forced to assume that the check was immediately deposited upon delivery.

In fact, two recent examples underscore the problem.  The first, involved a seller who initially requested and received a paper check; after the seller left the office, they decided that they preferred their funds to be wired. The second involved a realtor who decided (after a paper check was issued to the broker) that the commission check needed to be split between the agent and the broker.  In both cases, the paper check had been issued and left the sight of the closing agent, thus forcing the closing agent to assume that the check may have been deposited.  In each case, the closing agent was unable to honor the request.

To avoid these issues, it is even more imperative for the parties to confirm how they want their funds provided to them in advance.  Remember that once a paper check is issued and provided to a party, it cannot be reissued unless one is willing to wait ten days for a stop payment. The closing agent will now be forced to assume that the check could have been deposited.

As always, should you have any questions in regards to the foregoing, please consult with your local real estate attorney.


Berlin-Patten, 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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