What’s In a Wire?

Money tired up in a wire

The Ins & Outs of Wiring Money

Funding – aka “the money” – is a very important part of the closing process when it comes to buying/selling a house. The buyer needs to have it, and the seller wants it. There are a couple of different ways that this can happen, either by check or by a bank wire.

Now a check is pretty self-explanatory, but let’s hit on a few important and key points of this type of transaction. The buyer check should not be a personal check made out to the seller. It should also not be a check made out to the buyer and then signed over to the title company (making it a third party check). It should be a bank check, or even more ideal – and to be as safe as possible – the funds should be given to the title company (if applicable) and they will present their check to the seller. This creates a nice paper trail that any auditor will tell you is good practice.

A wire is a little trickier. In simplest terms, a wire is when money is transferred electronically from one account to another, whether the same banking institution or not. I’m sure you’re thinking, “What’s so hard about that? Just type in a few account numbers and hit ‘send’.” Well, it’s not quite that easy.

Keep in mind that every banking institution has different rules and regulations in which they follow that meet their own internal best practices. And it’s also reasonable to believe a large global bank may have different policies than, say, a small credit union might.

Title companies also see their share of “back to back” closings where a seller closes on the sale of their house and then turns around an hour later and becomes the buyer in another transaction. As exciting as this can be for the seller/buyer in this scenario, they could just be setting themselves up for a headache by scheduling things so tightly.

Here’s some facts about wires that all title companies wish more people were aware of:

  • Some banking institutions only process wires at scheduled times of the day, and sometimes only 1-2 times at that!
  • Wires don’t necessarily happen instantaneously once they are processed, there can be a “lag time” of an hour or more in some cases.

Both of these facts can be real game changers when it comes to the closing transaction.

Let’s say a seller just left the closing on the sale of their house and are heading right away to the closing on a home they are purchasing. If they deposit a check for proceeds to the house they just sold and try to write another check using those funds to purchase the new house, those funds may not all be available right away, as many banks need time for the check to “clear”, and only release a portion of a large sum immediately (please note, banks have differing policies on this).

Or, if the seller has funds wired into their account and then an hour or less later tries to wire funds to the new seller of the house they are buying, it can take hours for those funds to show up. And guess what happens at the closing when there is no funding? Well, in a nutshell, there is no closing. The seller doesn’t get paid, nor do the realtors, as the title company/attorney is not permitted to hand out any checks until the funding is in place and the transaction is completed.

Your takeaway today should be threefold. First, try to avoid back to back closings at all costs if you can. At least try and spread them out by a few hours to give some time for the dust to settle from the first one.

Secondly, if you can’t avoid back to back closings, at least try to have them both at Cumberland Title so that we can make sure the funds from the first closing are then used right away at the second closing.

And lastly, if you are going to do back to back closings at 2 different title companies, make sure you check with the both of them on what is the best way to accomplish this to avoid any issues. Generally speaking, we will accept a trust account check from another MAINE BASED title company if it can be made out directly to us.

There’s nothing worse than tears or frustration on what should be a happy occasion, so make smart choices and be prepared. Happy house hunting (or selling)!