A good funds law requires the settlement agent at a real estate closing to have your payment fully collected and available for withdrawal before any money goes out to the seller, lienholders, or anyone else. Roughly half of U.S. states have enacted these statutes, and while the specifics vary, the core rule is the same everywhere it applies: no disbursement until the buyer’s money has actually landed and cleared. That rule is what prevents a deed from transferring while the purchase money is still floating in the banking system.
For you as a buyer, the practical effect is that your payment method and its timing are not just preferences of the title company. They are the difference between closing on schedule and not closing at all.
Which Payments Qualify
Good funds statutes draw a hard line between money that is already spendable and money that might become spendable in a few days. Two categories generally clear the bar.
Wire Transfers
Wire transfers sent through Fedwire are the standard instrument at closing. Once a Fedwire payment is credited to the receiving bank, the transfer is final and irrevocable.1eCFR. 12 CFR Part 210 Subpart B – Funds Transfers Through the Fedwire Funds Service There is no hold, no clearing period, and no way for the sender to reverse the payment after the deed records. Title companies and settlement attorneys prefer wires for the bulk of closing proceeds, and in many jurisdictions wires are the only acceptable option once the total crosses a certain dollar threshold.
Cashier’s Checks and Certified Checks
Cashier’s checks and certified checks also qualify in most states because the issuing bank guarantees the payment. A cashier’s check is drawn on the bank’s own funds rather than the buyer’s account, and a certified check has the amount verified and set aside by the bank at certification. Under federal rules, a cashier’s check deposited in person must be made available by the next business day, and the same check deposited through other channels must be available by the second business day.2eCFR. 12 CFR 229.10 – Next-Day Availability Settlement agents commonly call the issuing bank to confirm the check is genuine before proceeding.
These checks generally must be drawn on a federally insured institution. A check from a bank or credit union without federal deposit insurance may not satisfy the statutory definition of good funds, even if the dollar amount is exactly right.
Payments That Get Rejected
Personal Checks
Personal checks are the most common instrument turned away at closing. The account may lack funds, the writer can issue a stop-payment order, and the clearing process runs for several business days. Under the federal funds availability schedule, a local personal check does not have to be made available until the second business day after deposit, and non-local checks can take longer.3Office of the Law Revision Counsel. 12 USC Chapter 41 – Expedited Funds Availability If a settlement agent disbursed against an uncleared personal check that later bounced, the seller could walk away without both the property and the money. Good funds laws exist largely to shut off that possibility.
Cash
Physical currency is liquid on its face, but settlement agents almost universally refuse it. Any business that receives more than $10,000 in cash in a single transaction, or in related transactions, must file Form 8300 with the IRS and FinCEN.4Office of the Law Revision Counsel. 31 USC 5331 – Reports Relating to Coins and Currency Received in Nonfinancial Trade or Business Nearly every closing exceeds that threshold, so accepting cash would trigger mandatory reporting on top of the practical problems of counting, verifying, and moving large sums. Most title companies prohibit it by policy.
Third-Party Checks
A check written by someone who is not a party to the transaction, or made out to someone other than the buyer, introduces fraud risk and ownership disputes. If the payer later contests the check, the challenge can cloud title and potentially unwind the closing. Settlement agents reject these instruments to keep the chain of funds clean and traceable.
Small-Dollar Exceptions
Good funds laws are less rigid than they first appear. Many states carve out exceptions for small amounts, on the sensible theory that forcing a buyer to wire $200 for a last-minute adjustment would be unreasonable. These carveouts typically let a settlement agent accept a personal check up to a set dollar limit per closing, provided the agent reasonably believes the check will clear.
The thresholds vary. Some states cap the exception at $500 per transaction, while others allow personal checks up to $5,000 or even $10,000 in aggregate. A handful of states let agents advance small amounts from their own trust accounts to cover incidental fees or minor adjustments. If any part of your closing costs will come from a personal check, confirm the limit with your settlement agent well before closing. Showing up with a personal check over your state’s threshold means the closing gets postponed until you produce an acceptable payment.
Digital Payments, Credit Cards, and Crypto
Newer payment methods sit in a gray area the law has not fully caught up to. Real-time payment networks like FedNow and RTP can move money instantly between bank accounts, which sounds like it should satisfy a good funds requirement. Some states are beginning to accept these transfers, but many statutes were written decades before instant payments existed and do not clearly authorize anything outside the traditional “wire transfer” or “certified check” categories.
Cryptocurrency, digital wallets, and credit cards are a different matter. The American Land Title Association takes the position that good funds should come from a federally insured depository institution and should specifically exclude cryptocurrency, credit cards, and other non-depository sources.5American Land Title Association. Real Time Payments / Good Funds The reasoning is that these methods lack the regulatory protections and finality guarantees that make wires and bank-issued checks reliable. If your title company will not accept Venmo, a credit card, or Bitcoin, this is why.
When the Money Has to Arrive
The right type of payment is only half of what a good funds law requires. The funds also have to arrive and clear before the settlement agent can disburse. Timing mistakes are one of the most common causes of last-minute closing delays.
Wire Timing
Wire transfers through Fedwire must be made available by the next business day after the bank receives them.3Office of the Law Revision Counsel. 12 USC Chapter 41 – Expedited Funds Availability In practice most settle within minutes or hours. The catch is the system’s operating window. Fedwire processes customer transfers until 6:45 p.m. Eastern Time, and any message received after that cutoff is rejected.6Federal Reserve Financial Services. Fedwire Funds Service and National Settlement Service Operating Hours A wire initiated at 4:00 p.m. Pacific is already past the East Coast deadline and will not process until the next business day.
Most settlement agents ask buyers to initiate wires at least 24 hours before closing. Banks can take hours to process an outgoing wire request, and many institutions have internal cutoff times earlier than the Fedwire deadline. A full day of buffer protects against delays you cannot control.
Check Timing
Cashier’s and certified checks clear faster than personal checks but are not instant. When deposited in person, federal rules require next-business-day availability; deposited through other channels, the hold runs to two business days.2eCFR. 12 CFR 229.10 – Next-Day Availability Settlement agents who accept checks typically want them one to two business days before closing so the funds have cleared by disbursement day.
Deposits made after a bank’s daily cutoff count as arriving the next business day. If your closing is Monday morning and you deposit a cashier’s check Friday afternoon after the bank’s cutoff, the bank treats it as a Monday deposit and the funds are not available until Tuesday.
Wire Fraud Around Closing
Once you know you will be wiring money, you become a target. Real estate wire fraud has grown quickly, with the FBI’s Internet Crime Complaint Center reporting $275 million in real estate losses in 2025.7FBI. 2025 IC3 Annual Report The typical scheme starts with a criminal compromising the email account of a real estate agent, lender, or title company employee, monitoring the transaction, and then sending the buyer fake wire instructions that redirect funds to a fraudulent account. By the time the mistake is discovered the money is usually gone. Nearly 88% of these fraudulent transfers go to accounts at U.S. banks, which gives the instructions a legitimate appearance.8FinCEN. FinCEN Analysis of Business Email Compromise in the Real Estate Sector
The defense comes down to one rule: verify wire instructions by phone using a number you already trust, not a number that appears in an email. Call your settlement agent at the number on their business card or the number you used when you first engaged them. Treat any last-minute change to wire instructions as a warning sign. Legitimate title companies rarely change their wiring details mid-transaction, and when they do, they confirm the change through more than one channel. After sending the wire, call the recipient on your trusted number to confirm the money arrived.
What Happens if the Rule Is Broken
For a settlement agent, disbursing before funds have collected creates personal exposure. If a check bounces or a payment reverses after the agent has paid the seller and lienholders, the escrow account goes negative and the agent may be on the hook for the shortfall. In states that regulate title insurance through an insurance department, disbursing against uncollected funds can also trigger discipline, fines, or loss of license.
For you as the buyer, the usual consequence of missing the good funds requirement is a delayed closing. That delay can cascade if the seller is using the proceeds to close on another home the same day. In some situations, missing the closing date is itself a breach of the purchase contract, which can expose you to penalties or give the seller a right to walk away. Confirm your payment method, the exact amount, and the timing with your settlement agent several days before closing, and follow their instructions to the letter.