Can You Bring Cash to Closing? And What to Do Instead

Real estate transactions involve significant financial transfers. While physical cash might seem like a simple solution, specific regulations and practical considerations dictate how funds must be transferred for such large transactions. Understanding the accepted methods for payment and how to prepare funds is important for a smooth closing process.

Reasons Physical Cash is Not Accepted

Using cash for real estate closings is generally not permitted due to regulatory requirements and practical challenges. Financial institutions and real estate professionals operate under strict anti-money laundering (AML) regulations, primarily governed by the Bank Secrecy Act (BSA). These regulations require the reporting of large cash transactions to the Financial Crimes Enforcement Network (FinCEN). Businesses, including those involved in real estate, must file IRS Form 8300 for cash payments exceeding $10,000, which includes funds received for property sales or escrow contributions.

This reporting requirement creates a compliance burden and can raise suspicions of illicit activities. Handling large sums of cash presents considerable security risks, such as theft or loss. Closing agents and title companies face difficulties counting, verifying, and securely depositing substantial amounts of currency. Cash also lacks a clear audit trail, making it difficult to verify the legitimacy and traceability of funds.

Approved Methods for Closing Payments

Instead of cash, accepted methods for real estate closing payments prioritize security and traceability. The most common method for transferring large sums is a wire transfer. This electronic transfer moves funds directly from the buyer’s bank account to the closing agent’s escrow account, typically arriving within 24 to 48 hours. It is essential to verify wire instructions directly with the closing agent through a confirmed, secure channel, such as a phone call to a known number, to prevent fraud.

A cashier’s check, also known as a certified check, is another option. This type of check is guaranteed by the issuing bank, meaning the funds are drawn from the bank’s own account after being secured from the buyer’s account. Cashier’s checks are reliable and commonly used for substantial closing costs or down payments. Some title companies may impose limits on the maximum amount they will accept.

Personal checks are rarely accepted for significant amounts due to the risk of insufficient funds and the time required for them to clear. They might be permissible for very small, miscellaneous fees, but are never an appropriate method for the main purchase price or down payment.

Steps to Prepare Your Funds for Closing

Preparing funds for closing requires careful planning. The initial step involves obtaining the final closing figures from your closing agent or lender, typically a few days before the scheduled closing date. This document, often the Closing Disclosure, provides the exact amount of funds required. Knowing this precise figure allows you to determine the best payment method for the amount due.

Next, decide whether to use a wire transfer or cashier’s check(s) based on the total amount and your bank’s capabilities and deadlines. For the majority of funds, a wire transfer is the preferred and most efficient option. To initiate a wire transfer, contact your bank and provide the exact amount, along with the beneficiary’s account number, routing number, and name of the closing agent. It is paramount to verbally confirm all wire instructions with your closing agent using a trusted phone number to safeguard against potential fraud.

If you opt for a cashier’s check, arrange to obtain it from your bank in advance of closing. While a cashier’s check can often be issued within minutes at a bank branch, allow sufficient time, especially if you need to travel to the bank or if there are specific bank policies. Ensure the check is made payable to the closing agent as instructed. Regardless of the chosen method, initiate the transfer or obtain checks with enough lead time, ideally 24 to 48 hours before closing, to ensure the funds are processed and available by the closing day.