“Good or Collected Funds” When Funding A Real Estate Transaction

Basically, state and federal rules prohibit licensed real estate closing/title agents from disbursing funds from escrow accounts unless funds are “collected funds.” The rule defines “collected funds” or as sometimes referred to as “Good Funds” under standard contracts for purchase and sale as funds that are “deposited, finally settled and credited” to the closing agent’s account.  This would mean that many purchase transactions would never disburse on the same day if any of the funds are being delivered other than by a wire transfer.

Florida Administrative Code  69O-186.008 Escrow Requirements (excerpts): (1)  A title insurance agent or title insurer may not use, endanger, or encumber money held in trust without the permission of the owner of such money, given after full disclosure of the circumstances. Accordingly, except as hereinafter provided, a title insurance agent or title insurer may not disburse funds unless the funds are “collected funds”. For purposes of this provision, “collected funds” means funds deposited, finally settled and credited to the title closing agent’s trust account.

Bank checks and cashier’s checks are considered by the Federal Reserve Board, under Federal Regulation CC, otherwise cited as 12 C.F.R. 229, to be “next day” payable items and may not be disbursed on until collected. Due to the level of fraudulent activity in the market most real estate closing agents are neither accepting cashier’s checks nor treating such checks as “same day funds”. Realtors are best served to understand the rules and inform consumers of the likelihood that any monies funded for a transaction (i.e. escrow, deposit or funds to close) should be in the form of a wire transfer to ensure that the funds are treated as “collected or good funds”. Due to the extent of fraud in the marketplace, the traditional use of personal checks, cashier’s checks and bank official checks are being phased out and replaced with the requirement of wire transfers to fund transactions.