Jan 1, 2018

You'll need 'Good Funds' to buy that home

In my book, money is good. Cash is great. And when it comes to getting a good deal on a home, or making the transaction quick and easy, it’s been said that cash is king.

But did you know that buying a home with cash – actual cold, hard cash – is almost impossible in Texas?

The Texas Board of Insurance (which governs Texas title companies) dictates how a title company can accept funds for a real estate transaction. It requires that all title companies collect “good funds” at closing. The goal is to protect against fraud.

They define “good funds” as a wire transfer, cashier’s check, certified check, money order, personal check, or cash. The title company has the discretion to determine which good funds it will accept. No one wants the security risk of a bunch of cash on hand. If you find a title company foolish enough to take piles of cash, let me know. I’ll see if they’ll take my points-earning credit card, too.

And lest you think buying a property with cash will help escape the tax man, think again. Even if you had a suitcase full of cash and could find a title company willing to take it, all title companies are legally required to report any cash or personal checks used to close a transaction that total more than $10,000 to the IRS (per IRS Publication 1544). This is designed to discourage money laundering, tax evasion, drug trafficking and those sorts of illegal activities.

Despite rampant wire fraud (and that’s a whole different story), wiring funds is still considered one of the safest and most convenient ways to send funds to the title company. In order to finalize a transaction and disperse funds to the seller or mortgage company, the title company must have collected, deposited and confirmed the money from the purchaser. That means any checks received must have cleared. And that can take some time. For example, once a cashier’s check has been deposited for a purchase, the amount does not become “good funds” until it has been paid by the issuing bank. No one likes facing a closing delay waiting for a check to clear.

Buying a property is only going to be good fun, if you’ve got the correct good funds.

[where: 75230]

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