Much has been made in Illinois about the Illinois Good Funds Act that affects real estate buyers and the proliferation of email scams to defraud buyers by misrouting their wired-in purchase funds. However, not much though goes into how a SELLER receives their proceeds. In most cases, a seller will receive a check at the closing table, but very few sellers actually come to a closing nowadays, instead preferring to pre-sign their closing package and skip the closing. So, now that your closing is scheduled, documents are drafted and signed, and the closing is all that’s left to be done, one question remains. How will you get your sale proceeds? Generally, there are two options available for the delivery of sale proceeds: (1) by check or (2) by wire. Our own preference is that our clients take a check. However, many folks prefer a wire. If so, here are a few things seller’s should consider about wiring their proceeds.
Wires are not instantaneous While it would seem like a wire is a “quick” way to get money from one place to another, it is actually a complex process and can take hours or even more than a day to get a wire to a particular destination.
Wiring policies are not uniform Different banks and different title companies all have their own policies when it comes to how and when they wire money. Some banks or title companies send wires on a “per wire” basis all day while others hold wires in a batch to send out once or twice a day. There is usually a “wire cut off time” after which new wires will not be sent out. Sometimes this deadline is in the early afternoon. as early as 2 or 3pm. So, if a deal closes late in the day or if the closing takes longer than anticipated, it is possible that a wire may not be ready to go out before the wire deadline resulting in a delay of one or more days.
Wire fraud is rampant Scammers have been using spoofed emails to trick home buyers into wiring funds to the wrong location for many years now. As a result, title companies have heightened concerns when it comes to wires in general and many title companies and closers have various procedures in place to try to cut down on wire fraud. Some, but not all, will want to double-check the wiring instructions with the seller before they will send a wire out after a closing is complete. That means that if a seller are unavailable to talk to the title company closer after the closing, it is possible that the wire might be delayed in being sent.
It costs money to send a wire Title companies charge to send a wire. Chicago Title routinely charges a $40 fee to wire funds. My own experience says that a Fedex overnight letter is much cheaper than a wire.
Wires are usually not reversible If a mistake is made in a wire, the sale proceeds wired are likely gone. That’s right – GONE! Unlike a check which takes a bit of time to clear and which can be stopped by the issuer, a wire usually can not be reversed. There are rare times when a receiving bank will note that something is not quite right and will not apply a wire to an account so that funds can be recovered. As a general rule, once funds are applied and placed into an account, they are generally unrecoverable.
Wire instructions can be difficult Title companies provide a form for a seller to fill out to provide wiring instructions to the title company so that a wire can be sent. This generally requires the name of the bank, a routing number, and an account number. A seller needs to be extremely careful when filling out the form to make sure that all numbers are correct and legible. Sometimes a 7 can look like a 1 and mistakes can be made.
It is easy to get wiring instructions confused It is not uncommon for a seller to provide the wrong instructions based on what is online or making the mistake of assuming that a routing number on a check is the same number for routing a wire. Most often when dealing with non-bank financial institutions like Merrill Lynch or Charles Schwab, it is common for their wiring instructions to differ from what is on a check. Additionally, a bank will have a different routing number for a wire than it has for an “ACH” transfer (which is not a wire) and sometimes a seller will mistakenly provide ACH instructions rather than wire instructions. All of these things can lead to a delay or worse, a misrouting of wired funds.
Suffice it to say that we don’t recommend that proceeds be wired. We much prefer that our own clients pickup or receive a Fedex of their proceeds. However, in the event that a seller really wants to take the risk (of loss, delay, misrouting, or the myriad of other things that can go wrong with a wire), a seller should take caution to make sure the instruction sheet is filled out carefully and completely.