Real estate closing companies need certified funds, but why? Certified funds are required at or prior to closing so that transactions can fund on the closing day and that the closing company has guaranteed funds in their trust account to be immediately disbursed for things like seller proceeds, mortgage payoffs, and vendor checks. 

But what constitutes “Certified Funds”? Certified Funds are monies that are available for immediate use.  Things like personal checks, ACH payments, and credit card payments are NOT considered certified funds because there are ways in which the funds can be rejected, returned or cancelled. This means that these funds are not readily available funds at the time of closing and therefore cannot be disbursed on closing day.

Certified funds can come in the form of:

  • Cashier’s Check
    • This is a check issued directly from a financial institution. When a financial pulls these funds out of your account, they are immediately withdrawn and an official bank or teller check is written. These checks will need to be made out to the appropriate party who is disbursing the transaction (e.g. closing company, bank, etc.). Some banks charge a fee to create a cashier’s check and some do not.
  • Wire Transfer
    • This is a transfer of funds directly from one financial institution to another. These funds are immediately removed from one account and are sent electronically to another account. Note that once funds are wired, they cannot be returned, so verifying wiring instructions is necessary to make sure that the funds are sent to the correct place. There is typically an outgoing wire fee and the receiving party may also charge an incoming wire fee. Wire fees typically range from $0-$40.
  • Money Order
    • These are like checks in which money is prepaid and a paper form of document is issued to a direct party. These can be purchased from some retailers, gas stations and the USPS. There is usually a limit to how many or how much money orders can be made for. There is also typically a minimal fee associated with creating a money order.

Many closing companies adopt various techniques to determine what they will consider a “certified fund”, so make sure that you check with your closing company to determine how your funds will need to be brought to closing so you can plan ahead.  Some closing companies will only accept wire transfers due to the amount of fraudulent cashier’s checks and money orders surrounding real estate companies.  Some companies will only accept certified checks from local banks.  If you are closing on a home in the near future, give your closing company a call work out the details of your closing funds in the weeks leading up to closing.

No matter what your closing company accepts, communication is key.  The lack of bringing the right funds (or the correct amount) could count in a delay in closing or even worse…not closing at all!