Did you know that May 10, 2011 is the effective date for most new legislation passed during the 2011 Utah Legislative Session? One piece of legislation that goes into effect next week that everyone should be aware of is a change to Utah’s Good Funds law.
First, you may ask: What is Good Funds? Simply put “good funds” means that you have received money, it has been deposited into your account, and those funds are now available for use. Title Companies are not allowed to do anything with the funds they receive in order to complete a purchase or finalize a loan unless those monies are good funds. Title companies have to obey state and federal law that specify when the monies they receive are “good funds” before they can then disburse those funds according to the instructions they are given by Buyers, Sellers, Borrowers or Lenders.
The most recent changes to Utah’s Good Funds law can be found at Utah Code § 31A-23a-406(5) and the changes are dramatic. The first and most important change is that title companies must have both collected and cleared money in order to disburse funds. What does this mean? Money must actually be received from the originating bank and have cleared the payee’s account as a final settlement (in other words no ability to recall the funds). This means the good old days of funding the day after depositing a large cashier’s check are over (except for some minor exceptions outlined below) as it may take several days for this process to occur.
What is still the best option for providing funds to your title company? A title company can still fund the same day they receive the funds via WIRE or in CASH. Of course since your title company is not a bank with armed couriers; a WIRE is the best option. A Title company can verify if wired funds have been received in a short amount of time, sometimes in just a few minutes to a hour, and then can immediately disburse funds to finalize a transaction. Wired funds are very difficult if not impossible to reverse or recall, unless the receiver gives their permission.
The minor exceptions allow for funding same day for amounts received under $10,000 via Cashier’s and certain Trust Account Checks, and for amounts $500 or less received in personal checks per closing. In most circumstances title companies will be reluctant to apply these exceptions due to the high risk associated with funds never clearing, and therefore may still require collected and cleared money regardless of the more lienient requirements.
So the morale of the story is:
Steer clear of problems and avoid unnecessary and costly delays in funding/closing your real estate transaction by preparing your clients to WIRE all necessary funds to the title company!!!