"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:

  • cashiers' checks;

  • certified checks;

  • money orders;

  • 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 established.

     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 established partnerships. 

   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 home purchase. 

     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 Christina Cartwright.

 

 


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