Knoxville Closings: What Is The Good Funds Law?
Personal check, cashier’s check, certified funds, or bank wire, it’s all money.
So, when it comes to bringing your funds for closing, does it really matter what form the funds are in?
After all, money is money, right?
Actually, it does make a big difference. This difference could determine whether or not any checks are able to be disbursed on closing day.
There’s something that’s called Residential Closing Funds Distribution Act of 2005 (a.k.a. Good Funds Law). In this post, we’ll take a closer look at what the Good Funds Law is and why it matters so much on closing day.
What Is The Good Funds Law?
The Good Funds Law ensures that checks disbursed at the closing table are backed by good funds at the time they are given out. This law exists to protect the general public. It ensures that title companies aren’t issuing checks that will bounce.
Effective September 1st, 2005, the law requires that funds over $1,000 are brought to closing are issued in one of the following forms:
- Cash
- Wired funds
- Checks issued by the state or one of its political subdivisions
- Cashier’s check
- Teller’s check or other official check issued by a financial institution and drawn on or payable through a financial institution within the same Federal Reserve check processing region as the location of the settlement agent, or
- Checks issued by a federal government instrumentality organized under the Farm Credit Act of 1971 (i.e. credit unions).
The Good Funds law prohibits a title companying from disbursing any funds for closing in a form other than what is listed above.
Why Does It Matter?
Title companies are a neutral third party that helps coordinate real estate closings. One of the most important things they do is disbursing closing funds. All money that is received and disbursed at closing is held in an escrow account. The only money that is held in an escrow account are those funds received for real estate closings. Money for closings only sits there until it’s ready to be disbursed.
In order to properly give out checks, the Good Funds Law requires that a title company is able to issue checks that are good when they are given out. While there may be other funds in an escrow account for another closing, those funds cannot be used to cover another transactions checks.
The Good Funds Law is ultimately protects the consumer.
A Final Word: Why We Have Are Funds Policy
This is exactly why we have our funds policy. Here are the different forms of payment we require for closing.
Here is our policy for closing funds:
- Personal checks are acceptable for amounts below $1,000.
- Cashier’s checks or certified closing funds are acceptable for amounts below $20,000.
- Wires are required on all cash transactions.
- If you’re closing on another home prior to closing with us, you’ll want to contact us about having that title company wire us your proceeds.
Are you in the process of buying or selling a home in the Knoxville area? Title Group would love to assist you in any way possible. You can reach us at 865-392-5801 or via email at [email protected].
Title Group of Tennessee is a full-service Knoxville title company. We specialize in Knox, Sevier, Loudon, Blount, Jefferson, and surrounding counties. Title Group of Tennessee is ALTA Best Practices Certified since September 30, 2015.
