Handling Checks at Closing

For those of us who have been in a real estate closing – regardless of what side you’re on – you can appreciate that there are a LOT of checks and balances happening during that transaction, let alone an enormous amount of paperwork.

Aside from procuring the necessary documents, ordering payoffs, checking taxes and titles, and putting together all of the necessary documents, it is the title company’s responsibility to ensure that funding has been received. It is extremely important to note that the transaction cannot be completed until that check or wire is received. Even if all the paperwork has been signed and that’s all you’re waiting around for. No money = no completed transaction.

Likewise, if would be irresponsible for the title company to hand out any checks before the transaction has been officially funded. Any title company or settlement agency that plays by the rules knows that this is actually a violation of the Bar Rules governing attorneys, Maine’s statutes, and quite possibly a violation of most lender’s closing instructions. To do this would put many parties involved in the transaction in a very precarious – and culpable – position.

From the perspective of a title company, trust accounts are highly regulated as they contain money that does not belong to them. The money contained in them belongs to other people who have transacted business through their company. They should never be using funds from one customer to fund a transaction for another customer. And by handing out checks before funds are received, that is essentially the exact scenario that is happening.

One very important point to note here also, is that Maine is what’s called a “wet funding state”. In short, that means that closings are not even supposed to happen without funding that is available to the parties. Many other states have an escrow system when real estate is transferred, where it’s a matter of course that checks are not given at the table (dry funding states), and the closing is essentially done in escrow. But checks are not handed out in this case either.

From a customer service perspective, Cumberland Title aims for all of our closings to be smooth and error-free. Unfortunately, there are times when a wire is taking longer than anticipated to reach us before the conclusion of signing the closing documents, and rather than just saying, “Oh, I’m sure it’s on the way, let’s just call it good and get you all on your way”, we have to cross all the T’s and dot all the I’s in accordance to the law as well as the procedures we have in place that are designed to protect all parties involved in the transaction. This all amounts to both legal and ethical concerns, both State law as well as attorney Rules of Ethics.

As always, we are always here to answer your questions and shed light on the parts of the process that may seem unclear or confusing. We pride ourselves on our reputation for clear, concise, transparent transactions and communication. Please do not hesitate to reach out to us at 207.899.4900, or matthew@cumberlandtitle.com.