"Good Funds:" A new law affects how you
pay closing costs
It has long been customary for a purchaser
or borrower attending a real estate closing to provide guaranteed funds,
such as a cashiers' check of certified funds to equate his or her total
amount due on the HUD-1 Settlement Statement - a combination of his or her
down payment and closing costs. Now, it is the law.
Effective January 1, 1996, new
legislation has been incorporated into the Ohio Revised Code which
prohibits a title agent or closing officer from accepting any monies other
than "good funds."
Acceptable funds are:
a bank check drawn upon a federally insured bank,
saving and loan, or credit union;
checks from a government agency or municipality;
a reciprocal title insurance agency check from a
previous closing; or
a wire transfer where verification of receipt has been
A personal check in the amount of
$1,000 or less may also be used, but any amount in excess of this figure
would result in the closing officer being unable to disburse the
transaction until guaranteed funds were provided to his or her agency.
Additionally, a borrower whose
intent is to use funds from a particular stock and/or investment account
would be required to wire those funds directly into the account of his or
her title company prior to the closing time.
Although it's been a common
practice in our area for a purchaser to be prepared for a real estate
closing with the necessary proof of insurance, a cashiers' check for the
amount due and any other requirements for a particular lending
institution, it has also been ordinary for minimal amounts of dollar
differences to be reconciled with a personal check.
It will now be necessary, in
order to comply with this new legislation, to be exact with guaranteed
funds, with the exception of the permissible $1,000 personal funds figure.
It is important to keep in mind
that this requirement is applicable to even very large corporations or
The "good funds" law accompanies
new legislation entitled IOTA - "Interest on Trust Accounts" -
and applies to trust accounts, which title agencies statewide must
maintain for their firms.
Previously, such an account has
been a noninterest-bearing trust account. However, title agencies must now
create an interest-bearing account where at year's end, the total interest
accrued shall be rendered to the Legal Aid Fund of the state of Ohio.
The Miami Valley Land Title
Association, in cooperation with the Dayton Mortgage Bankers Association,
the Dayton Area Board of Realtors, and the Home Builders Association of
Dayton and the Miami Valley, are working diligently to facilitate each and
every closing transaction, and to provide the required calculations as
early as possible to the parties of a real estate transaction.
We are very fortunate that the
Realtors and builders in our area are well prepared, professionally
educated and extremely proficient in their advanced preparation for the
actual details necessary to ensure a smooth and expeditions closing of a
Be certain to stay in close
contact with your particular agent or builder representative as you
approach the acquisition of your family's new home.
Taken from the Dayton Daily
News Real Estate Plus section, Sunday, January 21, 1996. Authored by