Indiana Good Funds Law

There is a new law that takes effect next month that will have a big impact on the way closings are handled in the state of Indiana. The “good funds law” or House Bill 1374 will require all funds to bring to a closing over $10,000 to be in the form of a wire to the title company.

Effective July 1, 2009, any funds presented at closing over $10,000 must be in the form of a wire before a title company can disburse. This law affects all escrow funds in connection with a real estate transaction whether it is residential or commercial.

In the past, you (as a buyer) would typically be waiting with baited breath for “the number” or the final “cash to close”. All too often the final amount you needed to bring to the closing table comes WAY too late in the game (soon to be subject of another post) and often comes only hours or minutes before the closing. With this new law requiring anything over 10K to be wired, this simply won’t cut it anymore. Wires, although it would seem like a very fast way to transfer money, are obnoxiously slow. Sometimes wires can take 4 hours or more to hit the bank account.

How does this affect me?

Well, it could have both a good impact and a bad impact. First, the good; I can see where quality loan officers and banks will do their best to respond to this and double their efforts to get the package to the title company earlier so that the funds have time to get wired. The cream will rise to the top even further IMHO in the world of mortgage lending on this one. This brings up another point…listen to your friendly Realtor when they recommend a loan officer. They know the good from the bad and they are most likely recommending this person because they trust them and have a working relationship with them. TRUST ME...a good working relationship with a loan officer can be the difference between a smooth transaction and loads of frustration.

Now the bad side that I see; average and subpar lenders and loan officers will still get everything to the title company last minute and this could cause huge headaches and delays in closings. In addition, if you have ever tried to do a back to back closing you know this is already an extremely stressful situation. Add this new wire requirement into the mix and even the most even keeled person might be having a heart attack by the end of the day. In a back to back closing situation, it will become more important than ever to use the new selection on the standard contract that allows the buyer to select the title company.

While this will inevitably affect the consumer, a great real estate agent will make this as seamless as possible and take the brunt of this for their client. It just means more diligent follow up on your real estate agent’s behalf and less lying on the mortgage broker’s behalf:)

 

Take home points:

- New law causes buyer’s to wire any money over 10K instead of bringing check to closing

- Find a real estate agent that understands this, the impact it has on the transaction, and how to protect you as a seller or a buyer.

- Seriously consider your agent’s recommendation(s) when it comes to loan officers.

- Back to back closings will be a bear…try to use the same title company for both.

 

- Use Red Door Real Estate:)…we get it and put your best interest before ours