If you're ready to close the deal on your dream home, chances are you've been anticipating this moment for quite a while. After months or even years of scouting homes, securing financing, negotiating prices, and more, all that's left between you and those new house keys is to sign the final check over to the title company or escrow agent.
Undoubtedly, the title company will require certified funds. You can either bring a cashier's check or you can make a wire transfer. What's the difference? Will the money get to the title company in time if you wire the funds?
At this final stage, with so much at stake, you'll want to ensure a smooth transaction. Read on to find a comparison of wire transfers and cashier's checks, including how each payment method works, pros and cons of each, and what will get you into your new home quickly and easily.
- When it's time to close on your home, you can use either a cashier's check or a wire transfer to provide certified funds.
- A cashier's check is a check written by your financial institution to your payee. As the account holder, you must have the funds available in your account.
- Wire transfers move money directly from your financial institution to the payee's, skipping the intermediary and the check-writing process altogether.
- Regardless of the method you choose, be sure the funds are coming from a verified source.
Truth vs. Fiction
There are two popular myths often circulated about these options.
- The first is that cashier's checks are free from fraud. No, they are not.
- The second is that all wire transfers are instantaneous. In fact, they are not.
How Do Cashier's Checks Work?
A cashier's check is essentially a check written by your bank or credit union to the intended payee. As the account holder, you must go to your financial institution in person, provide identification, and request a cashier's check from the bank teller. The check is drawn against the financial institution's funds—not yours—but you must have the amount of the check cleared in your account as insurance for the financial institution.
Though less common, it is possible to get a cashier's check online. The process is mostly the same, but through a secured online portal instead of with a teller. The physical check will be sent in the mail, so it doesn't really save you much time overall.
The teller will request the payor and payee names and dollar amount for the check. They'll check your ID and verify that you have sufficient money in the account to cover the transaction and that all recent deposits have cleared. They'll draw a cashier's check with your name and the payee's name on it and sign or stamp it with their official title, thereby branding it certified. Depending on the type of institution and services offered, they might charge a small fee for drawing the cashier's check.
Potential Downsides of Cashier's Checks
Obtaining a cashier's check can present problems. Some financial institutions require advance notice before they'll withdraw a large sum of money and give it to you.
Cashier's checks are not immune to fraud—they can be altered by crooks or used in a number of scams. This hazard usually affects the recipient's end of the bargain, but a payor is wise to understand potential drawbacks as well.
How Do Wire Transfers Work?
Wire transfers move money directly from your financial institution to the payee's, skipping the intermediary and the check-writing process altogether. They used to be delivered via telegraph, but that's changed; most wire transfers are processed electronically these days. Ordinarily, they are relatively quick and are completed within 24 hours. The service that many financial institutions use for these secure messages is SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication.
Many financial institutions send out wires only at certain times during the day. If you miss a cut-off time, your transaction will be processed the following business day.
You can ask your bank or credit union to make a wire transfer in person, over the phone, or via the Internet. Online transfers give you an advantage if you're pressed for time, since you don't have to be physically present.
Potential Downsides of Wire Transfers
Though typically speedy, under some circumstances wire transfers can take up to a few days or more, such as if you're sending money internationally. Depending on the financial institution, the funds might have to be wired to a corresponding or partner institution, which can delay receipt. The wire might also require approval before transmission.
There are fees associated with the transfer, and limits on the amount of money you can transfer via wire; these vary by institution.
Wire transfers typically can't be undone. That means you can't change your mind at the last moment and reverse the transaction.
Why Closing Agents Insist on Certified Funds
Suppose you're skeptical of financial institutions altogether and prefer to simply walk into your home closing with a big sack of money and dump the cash on the table. Unfortunately, closers don't want the liability associated with that much cash. Moreover, transactions in excess of $10,000 in cash must be reported to the Internal Revenue Service.
So, a wire transfer or a cashier's check are the safest options.
Check with your bank or credit union before you need the money, and keep in mind that you might have to deposit the funds with the closer the day before closing.
Title companies, escrow officers, and other closers can't record a deed until the equivalent of cash is in hand. These people represent both the seller and the buyer. They promise that the seller will receive the money when the deed is recorded. They promise to record the deed when the buyer deposits the money.
The laws for this process can vary from state to state, but funds must often be deposited and available prior to disbursement. Funds received via wire transfer can often be paid out immediately, but funds received via cashier's check must be deposited the day prior to disbursement. Funds received in any other manner will delay disbursement.
A Word of Warning
Regardless of the method you choose in closing, make sure the funds are coming from a source that has already been verified by all parties involved in the home sale. In other words, don't decide that in the interest of time you'll take a shortcut and have a friend write a check, or visit an unverified wire-transfer booth at the airport. Closing on a house is serious business, and in the final stages of sale there's little room for error.
Frequently Asked Questions (FAQs)
How long does it take to close on a house?
If there's a mortgage involved, it typically takes 30-45 days to close on a house. Depending on the type of mortgage and any other issues that arise during the closing process, it could take longer. For example, if the appraisal is lower than the sales price, then the buyer and seller will need to negotiate and potentially order a second appraisal.
What is a title company?
A title company verifies that the title of a home is clear and can be transferred to the homebuyer. A clear title means that there are no liens on the home and no other issues that could prevent the sale of the home. Once the title company verifies the title is clear, it issues title insurance.