Can You Buy a House With a Cashier’s Check?
Understand how cashier's checks fit into home purchases, including security best practices and alternative payment methods for closing.
When purchasing a home, the transfer of significant funds is a pivotal moment. Buyers often seek payment methods that offer both security and efficiency for a smooth closing. Understanding payment options for large financial transfers is important in real estate.
The Role of Cashier’s Checks in Real Estate Transactions
A cashier’s check represents a secure payment method because it is guaranteed by the issuing bank’s own funds, not from a personal account. This distinction provides assurance to the recipient that the check will not be returned for insufficient funds. Due to this reliability, cashier’s checks are frequently preferred for substantial financial transactions, like home purchases.
To obtain a cashier’s check, visit your bank or credit union and provide the full amount from your account or in cash. The bank then issues the check, often charging a small fee. This process requires the exact name of the payee and the precise amount of the check, as blank cashier’s checks are not issued.
Cashier’s checks are commonly used for home purchase stages, including the down payment, closing costs, or the entire purchase price. The funds are drawn from the bank’s reserves, ensuring the payment is secured and will clear. In real estate transactions, typical payees include the title company, escrow agent, or an attorney’s trust account.
Ensuring Security When Using a Cashier’s Check
Recipients of cashier’s checks, such as title companies and escrow agents, verify their authenticity. They examine the check for security features like watermarks, microprinting, security threads, and perforated edges, designed to deter counterfeiting. An important step involves directly contacting the issuing bank using a verified phone number—not one printed on the check itself—to confirm its validity and issuance details.
Buyers should safeguard their funds when using a cashier’s check. Obtain the check only from your trusted bank and review all payee details for accuracy before it is issued. Once obtained, transport the check securely to the closing, treating it with the same care as physical cash.
If a cashier’s check is lost or stolen, contact the issuing bank immediately to report the incident. The bank will require a “declaration of loss” statement. To mitigate the bank’s risk if the original check is later presented, an indemnity bond may be required. Without an indemnity bond, reissuing funds for a lost check can involve a waiting period, commonly around 90 days, varying by institution.
If an individual uses more than $10,000 in cash to obtain a cashier’s check, the bank is required to file a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN). This is a regulatory measure to track large cash transactions. While cashier’s checks offer a high level of security, some closing agents may have internal policies regarding the maximum amount they will accept, sometimes preferring wire transfers for large sums.
Other Payment Methods for Home Closings
Beyond cashier’s checks, other payment methods are used in real estate transactions. Wire transfers are a common alternative, moving funds electronically between bank accounts. These transfers are valued for their speed, often completing within the same business day, making them suitable for time-sensitive closings. However, vigilance is necessary to prevent fraud, as wire transfer scams are a concern in real estate.
Personal checks are not accepted for primary closing funds due to the risk of insufficient funds or slow clearing. Lenders and title companies require guaranteed funds for substantial transactions. While a personal check might occasionally be accepted for smaller closing costs or earnest money deposits, it is rarely an option for large sums.
Certified checks are a middle ground between personal and cashier’s checks. With a certified check, the bank verifies that sufficient funds are available in the payer’s account and then earmarks those funds, stamping the check as certified. The funds are still drawn from the customer’s account, not the bank’s. Certified checks are less commonly used for the full purchase price at closing compared to cashier’s checks or wire transfers.
Automated Clearing House (ACH) transfers are another electronic payment option. They process in batches and take one to three business days to clear, making them too slow for immediate closing funds. ACH transfers can also be revoked, risking fund finality for escrow. Thus, ACH transfers are used for smaller, non-time-sensitive payments like earnest money deposits or commission disbursements, not final home payments.