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Wiring Of Funds - The New Norm

January 13, 2017

 Banking (and Real Estate) embrace the Digital Age


It wasn't that long ago that our banking was done in person and by use of checks, money orders, or other paper representations of actual cash.  Readily, both businesses and consumers grew to love the convenience and security offered by electronic banking.


Now, the wiring of funds, as opposed to the use of checks, dominates the real estate industry as well.  Here are the three main areas that we see electronic wire transfers as the 'new norm' in our industry:


The Buyer's Funds At Time Of Settlement


The most recent and most noticeable shift to the use of electronic funds transfers involves the Buyer in a real estate transaction.  Up until recently, a Buyer would need to visit their bank a day or two before their scheduled settlement in order to obtain a Cashier's Check or a bank check in Certified Funds to cover their Down Payment plus any required closing costs due at Settlement. 


The use of these 'guaranteed' sources ensured that the check was good and would not 'bounce' after the closing was completed. 


This requirement was the standard of practice and was in place for many, many years in our industry.  Today, however, most retail banks no longer issue Certified or Cashier's Checks, instead relying on electronic transfers.  Some banks may offer "Official Funds", but these do not ensure that the funds are actually in place (received by the Settlement Company) at the time of closing and may actually require up to three days to clear the Settlement Company's account.


Virginia Law requires home purchasers to tender "good and available funds" to the Settlement Company prior to closing.   So, enter the ease and certainty of electronic wire transfers as the most convenient and dependable solution to meet these requirements.


The Seller's Funds After Settlement


In Virginia, a Seller does not necessarily receive their proceeds as a check at the conclusion of settlement.  This is because the signed Deed that transfers the ownership to the Buyer needs to be recorded at the County or City Courthouse and entered into the Public Record.  Once this occurs (typically the next business day) the Seller's funds may be released to them. 


So, these days most Sellers will give wiring instructions to the Settlement Company directing that their proceeds be wired in a specific account or accounts.  The funds typically appear in the Seller's account the next business day after Settlement once the Deed has been properly recorded.


The Buyer's Earnest Money ("Good Faith") Deposit


Here in Northern Virginia, our most widely used Residential Sales Contract now gives the Buyer the option of providing a physical check for their Earnest Money Deposit (a.k.a. "Good Faith" Deposit) to accompany their contract offer, or to have a check provided later within a prescribed period of time once the contract has been accepted.


This is the final area of our typical real estate transactions that the practice of a written check still prevails.  The other (evolving) option is an electronic wire transfer of the agreed-upon funds to the "Escrow Agent" who will hold the funds per the terms of the sales contract.  As we move forward, even this aspect of how we do business is likely to succumb to the digital alternative.


As experts on the practices and protocols of the Northern Virginia real estate market, we at The Art of Real Estate Team will guide you through the process, whether you are buying or selling a home!


"We Sell Homes From A Fresh Perspective...YOURS!"

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