Opening Titles and Closing Remarks

Indiana's new Good Better Funds Law is effective July 1, 2009. Many of my clients are expressing concerns about back to back real estate closings and how to avoid long delays in funding while waiting for wire transfers to be received by the title company.  If a chain of two or more closings is happening with a single closing agent there won't be nearly the problem with getting acceptable funds. Once the closing agent receives wire transferred funds on the first transaction the proceeds from each successive closing will already be in the closing agent's escrow account and wire transfering will be unnecessary. If a chain of transactions is closing with more than one title company or closing agent then the first closing agent will need to wire transfer the seller's proceeds to the next title company.  

To minimize delays, I recommend that you try and schedule your closings on Tuesday or Wednesday mornings.  A Tuesday or Wednesday closing will be among the first ones to be worked on by the lender each week. Friday closings only get worked on after the previous days closings are completed. We find that many scheduled Friday closings get bumped back to later in the day or rescheduled for the following Monday. Closing Tuesday or Wednesday puts your deal near the front of the line. 

A closing that is completed by 10:00 a.m. or 11:00 a.m. will allow enough time for the closing agent to order the wire transfer to the next closing agent and for the wire transfer to be sent and received by the banks involved.  Successfully completing wire transfers involve a number of people and processes. The title company at either end has little or no control or influence over these people or processes. Some banks will process wire transfers immediately. Some banks do them in batches only two or three times a day. Over the years I've come to realize that no one I can talk with knows for sure when a wire transfer has actually been sent. When people tell me that they've sent the wire they almost always mean that they've just given it to the next person in the process.  

I am confident that John Bethell Title Company, Inc. will handle the logistics of this new law fairly well. Our bank processes wire transfers as they receive the requests. We receive email confirmation of wires transfers sent and received. We have a later cut-off than at most other banks. Much of the process is within our own control. Still, wire transferring will take longer than cutting a check to someone. The irreversible nature of wire transfers requires that we employ careful accounting procedures to prevent data entry, transcription or other errors; more procedures than we need when cutting checks. 

Scheduling your closings for earlier in the day and earlier in the week will allow for the money to get to where it needs to be when it needs to be there.

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Another post in my continuing series Ask the Title Guy.

We've prepared a Wire Transfer Information Kit for Realtors® that Tammy Walker is currently distributing. If you'd like one, please email me or leave a comment.

Beginning July 1, 2009 the logistics surrounding many Indiana real estate closings will become even more complicated. House Enrolled Act 1374 effectively requires that most funds received by a title company or settlement agent for a closing be wire transferred. Cashier's and certified checks will only be acceptable for amounts under $10,000. The Indiana Department of Insurance is the responsible agency for monitoring compliance with the law. Title agents that ignore this law risk licensing actions by the DOI.

The biggest concern my clients express is that complying with the new law will result in even more delayed closings. There are a lot of reasons why closings get delayed. Right now the most common reason is that the lender is unable to meet the scheduled closing date. Lately, about twenty-five percent of our closings are being rescheduled at the last minute due to loan approval issues. Until we have the lender's closing instructions and their approval of the HUD-1, we are unable to provide a firm figure to the buyers. And without a firm figure, the buyer of course, cannot initiate a wire transfer of funds. 

Here's a suggestion for avoiding a wire transfer induced delay. It won't work in all situations, but you may find it helpful. 

If there are two or more buyers they can each provide a cashier's check and avoid the wire transfer requirement if each of their respective shares of the funds needed for closing is less than $10,000. For example, if two buyers need $16,000 to close, each one can provide a cashier's check for $8,000. (I don't even think that it needs to be separate checks.) 

Be sure to check with your title company or settlement agent and make sure that this suggestion is acceptable to them. 

If the buyers each need more than $10,000 to close I strongly suggest that they wait to initiate their wire transfer until the exact amount is known. The law makes no provisions for providing some of the funds as wire transfers and some funds as cashier's or certified checks if more than $10,000 per party is needed. In my opinion requiring buyers to make two wire transfers is worse than waiting until you have an exact number. 

My next post will address how what time you schedule your closings for will help or hurt your chances for an on time closing

I hope that by now all Indiana Realtors®, mortgage lenders and other real estate professionals know about Indiana House Bill 1374. This new law, which is effective on July 1, 2009, prohibits title companies from disbursing real estate closings without funds over $10,000 having been wire transferred to the title company. I summarized the law in an earlier post here. 

During the month of May I watched our business with an eye towards how this new law might disrupt or enhance closings. Reviewing our deposit records I see that about one-half of our purchase closings would have required the buyer to wire us funds had this law been in effect last month. We've also talked with a number of banks to get an idea of the process that will be involved for buyers needing to wire their funds. 

The most important thing we can do is to prepare buyers and sellers. Managing expectations will go a long way towards keeping the closing a pleasant experience for all. Buyers should be made aware in advance that wiring their money may be required. Sellers must be cautioned that there's a possibility that funds may not be available immediately at the closing. 

The biggest change is for buyers, who often are going to be required to wire their closing funds. After talking with several banks it seems that three or four hours is the average time that (meaning some will take longer) it will take for a wire to be initiated by the buyer at their bank and received by the settlement agent's bank. Many banks have early afternoon cut offs for processing both outgoing and incoming wire transfers. This will result in some wire transfers not being completed until the following day. 

Instructions for wire transferring funds to our escrow account are now included with each title insurance commitment we issue. Give the buyer a copy of those instructions when you receive the commitment. We are distributing an information package to our customers that answer many of the questions that will no doubt come up. The package will help you explain the process to buyers and sellers. 

Don't lose sight of the fact that although this is a significant change for Hoosiers, over thirty other states have enacted some form of this type of law. Real estate transactions continue to take place in each of those states.  I'm certain that it won't take long before wiring funds to the settlement agent will be just another routine aspect of the transaction.

Over the next few days I will be sharing my thoughts on likely scenarios. Please check back regularly.

Here's an update on the situation with real estate taxes based upon actual knowledge and an informal telephone survey made yesterday.

The Monroe Country Treasurer mailed property tax bills Friday May 29^th. We are now using the 2008 pay in 2009 real estate tax amounts for all payments and prorations. The first installment of Monroe County taxes is due Friday June 26^th.

Greene County property tax bills are mailed and the first installment is also due June 26^th.

Owen County property tax bills were mailed in April and their due date was the statutory May 10^th.  Congratulations to Owen County-one of the few to be on time. Payments made after May 10th are subject to a ten percent penalty.

Lawrence County is awaiting approval of their tax rate. Once their rate is approved they will establish a due date for taxes. Until their rate is approved, we will continue to use 2007 pay 2008 tax amounts for all prorations.

Orange County is in the same situation as Lawrence County.

Brown County is still a year behind and holding.

I will continue to post updates as more information becomes available.