SHOW! ME! THE! MONEY! Cuba Gooding, Jr. coined that term as the somewhat “has-been” professional football player Rod Tidwell in the iconic romantic comedy, Jerry Maguire. In an unforgettable scene, Tidwell directs his sports agent, Jerry Maguire, played by Tom Cruise, to “show me the money” in a comical yet poignant way. 

A settlement agent would never demand that a purchaser “show me the money.” However, the settlement agent must be in receipt of all signed closing documents AND all closing funds for settlement to be complete, as Virginia is a “wet settlement state” – essentially settlement is complete when the ink on the signed closing documents is still wet, theoretically speaking.

One might ask, “how hard can it be to get the purchase funds in, assuming the buyer has the funds?” It is true that, in certain instances, the transfer of funds requires only a few keystrokes on a computer. However, it is not always so simple in real estate transactions where timing is crucial and not all methods of payment are accepted. Remember: prior planning prevents problems. It is imperative that purchasers plan ahead on how and when to get their settlement funds to the settlement agent, as issues can result in delayed closings, cancelled contracts, and even lawsuits. Below you will find descriptions of payment methods as well as examples of some past problems encountered. 

Settlement Agents generally accept purchaser funds in two different forms: cashier’s check and wire transfer, both discussed below. These methods share two important traits: (1) the funds are immediately available and (2) the funds are not retractable.  

Cashier’s Check – This is a hard copy check that the buyer would obtain from a financial institution. Funds are drawn from the buyer’s account with that institution and the check is signed by the bank’s representative. The check is payable to a third party; in the case of a real estate settlement, that would be the settlement agent. 

Wire Transfer – This involves the purchaser initiating a wire transfer through his/her bank account to be deposited directly to the settlement agent’s account. The settlement agent provides written wire instructions - through a secure method - and it is crucial to follow those instructions exactly. High frequency of fraud exists in wire transactions so verifying the instructions by phone and following the instructions exactly will ensure the funds go to the correct account. Some banking institutions require wire requests be made in person while others allow for an online transaction. Some institutions have a time delay in releasing wire disbursements so buyers will need to take this into account as often, time is of the essence.

Assignment of Funds – In addition to wire and cashier’s check, settlement agents also may accept an assignment of funds. This is used when a buyer is selling another property and designates or “assigns” the proceeds from that sale towards the purchase of another property. This allows for back-to-back sale and purchase transactions, without the added concern of time delays from funds clearing through different accounts. The settlement agents involved in the two transactions typically coordinate the assignment of funds which would ultimately be wired to the buyer’s settlement agent. 

It is important to note that personal checks, ZOCCAM deposits (an online method of check deposit for real estate transactions), and ACH (short for “Automated Clearing House”) payments, are not acceptable for closing funds. These first two methods may be acceptable for Earnest Money Deposits because there is time for those to clear before settlement. However, those cannot be used for closing funds because the funds are not immediately available and checks are retractable.

Your buyer is ready for closing: The date and time is scheduled. The settlement agent and the lender both provided final numbers for closing. The buyer has the required funds in his or her account. The settlement agent sent your buyer instructions for delivery of closing funds. Everything is all set. All is good with the world, right? However, what if: 

• The buyer is out-of-state and signing with a notary closer but has missed the banking deadline to send the wire.  

• The buyer is out-of-state and signing with a notary closer on the west coast. The day prior to closing, the buyer realizes that a wire transfer must be initiated at a bricks and mortar bank branch. Unfortunately, the closest bank branch to the buyer is on the east coast.

• The buyer mistakenly initiates an ACH instead of a wire. This one can be particularly stressful. Some banking institutions default to the ACH option when one attempts to wire funds. The bank sends an ACH instead of a wire, but the settlement agent’s bank cannot accept it; the funds sit in limbo with neither the buyer nor the settlement agent’s banks accounting for the money. Most buyers do not have excess purchase funds to resend to the settlement agent nor do they feel comfortable about where the original funds are. This could possibly delay closing for a few days pending resolution.

• The buyer initiates the wire the day prior to closing. However, on closing day the settlement agent has not yet received the wire. At the table, it is determined that the buyer’s bank requires 48-hour advance notice on outgoing wires. 

• The buyer initiates the wire the day prior to closing. However, on closing day the settlement agent has not yet received the wire. At the table, it is determined that there was a discrepancy when the wire was set up – the entire name of the settlement company was not included on the wire. The buyer’s bank held the wire under a 72-hour review pending clarification.

• Closing is scheduled for Friday at 4:00 PM. The buyer arrives with a cashier’s check for the closing funds. However, the buyer relied on a preliminary settlement statement with no lender numbers when getting the cashier’s check, as opposed to the final lender Closing Disclosure. The cashier’s check was short by several thousand dollars. The buyer then must scramble to get to a bank, move funds around, and produce a second cashier’s check for closing. 

Prior planning and scrutiny of final numbers, lender instructions, bank instructions, and settlement company instructions are imperative in the settlement process. Use the closing numbers on a final buyer Closing Disclosure for financed transactions or the final Alta Settlement Statement for cash transactions. Contact your bank or other financial institution well in advance of closing to determine any policies and/or restrictions on sending wires or issuing cashier’s checks. Follow the settlement agent’s instructions. Always ensure wire instructions are provided to you via a secure portal and then verify those instructions. Ask questions if in doubt. 

 Virginia Code Chapter 9, section 55.1-900 provides as follows: 

“’Settlement’ means the time when the settlement agent has received the duly executed deed, loan funds, loan documents, and other documents and funds required to carry out the terms of the contract between the parties and the settlement agent reasonably determines that prerecordation conditions of such contracts have been satisfied….”