Good funds laws require that money used to close a real estate transaction be verified, collected, and irrevocable before the settlement agent disburses a single dollar to the seller, the payoff lender, agents, or tax authorities. Most states have enacted specific good funds statutes, and the rest enforce similar requirements through title insurance regulations and escrow licensing rules. The practical effect on you as a buyer or seller is the same almost everywhere: wire transfers arrive a day early, personal checks are capped or banned outright, and the closing does not happen until every incoming dollar is safely in the escrow account.
Why “Good Funds” Exist as a Legal Category
A closing is not a single payment. It is a stack of payments happening at once, with the settlement agent cutting checks to the seller, the existing mortgage holder, the real estate brokerages, and the local tax collector, all from the same escrow account. If any incoming deposit fails after those outgoing checks are sent, the account goes negative and every recipient is exposed. The good funds rule is the safeguard against that scenario. Funds are “good” when the settlement agent can spend them right now with no risk that the bank will reverse the deposit, freeze it, or discover it never truly cleared.
Which Payment Methods Qualify
The methods that reliably meet the standard are wire transfers, bank-issued checks such as cashier’s checks and certified checks, and cash. Wire transfers moving through the Federal Reserve’s Fedwire system are treated as irrevocable once they post to the receiving account, which is the main reason nearly every closing now runs on wires.1eCFR. 12 CFR Part 210 Subpart B – Funds Transfers Through the Fedwire Funds Service Cashier’s and certified checks qualify in most states because the issuing bank has already set aside the money, so there is no risk the payer’s account will fail. Cash qualifies as well, though almost nobody brings large amounts of it to a closing table.
Personal Check Limits
Personal checks are the riskiest instrument at a closing because the account holder can stop payment or overdraw after signing. Good funds laws generally either bar personal checks from closings or cap them at a small dollar amount. The typical range across states runs from $500 to $5,000 per closing. Ohio allows personal checks up to $10,000 in aggregate as long as the agent deposits them by the next banking day.2Ohio Legislative Service Commission. Ohio Revised Code Section 1349.21 – Disbursing From an Escrow Account North Carolina’s Good Funds Settlement Act permits personal checks up to $5,000 per closing when the settlement agent reasonably believes the check will clear.3North Carolina General Assembly. North Carolina General Statutes Chapter 45A – Good Funds Settlement Act Some states set the ceiling as low as $500, and only for incidental fees.
The exception exists so a buyer covering $327 in prorated property taxes does not have to arrange a separate wire for a small amount. The bulk of the money still has to move through a guaranteed instrument. If you plan to bring a personal check to closing, confirm the local limit with your settlement agent well in advance. Showing up with a $3,000 personal check in a state that caps them at $500 will stall the closing on the spot.
Available vs. Collected: Why Timing Matters
Federal law sets the outer boundaries for how long banks can hold deposits through the Expedited Funds Availability Act, implemented as Regulation CC. Regulation CC does not override state good funds statutes, but it creates the banking framework the settlement agent has to work inside.4eCFR. 12 CFR Part 229 – Availability of Funds and Collection of Checks (Regulation CC)
The distinction that trips people up is between funds being “available” and funds being “collected.” Your online balance may show a deposit the morning after you drop off a cashier’s check, but availability does not mean the issuing bank has actually sent the money. The transfer between banks can still be in progress. For an ordinary checking account, that gap is invisible. For a settlement agent holding several hundred thousand dollars in escrow, the gap is everything, and good funds laws force the agent to wait for collection, not just availability.
Under Regulation CC, wire transfers must be available no later than the next business day after receipt.5Federal Reserve. A Guide to Regulation CC Compliance Cashier’s and government checks get next-business-day treatment for the first $6,725 deposited. That $6,725 figure is the current large-deposit threshold and is effective through mid-2030.4eCFR. 12 CFR Part 229 – Availability of Funds and Collection of Checks (Regulation CC) Amounts above the threshold, deposits into new accounts, and checks the bank has reason to doubt can be held longer, up to five business days for local checks and longer for exception cases.
Put those two rules together and the reason for the standard closing procedure becomes clear. A $400,000 cashier’s check delivered Monday morning makes only $6,725 available Tuesday; the rest can sit under a hold for several business days. That is why most settlement agents now require closing funds to arrive by wire at least 24 hours before signing. The wire clears faster than any check, and the agent can confirm collection before anyone puts pen to paper.
Wet Funding States and Dry Funding States
States split into two camps on when the money actually moves relative to the signing. In wet funding states, funds are disbursed at the table or within a day or two of signing. The seller walks away knowing the money is on its way. Most states follow this model.
In dry funding states, the parties sign every document first and the transfer of money happens several business days later, once every condition has been verified. Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, and Washington permit dry closings. The signed documents sit in escrow and are not recorded until funding is confirmed. For buyers and sellers used to wet closings, the delay can feel strange, because the deed and the mortgage are already signed but nobody has been paid.
Neither model is inherently safer. Wet closings get sellers paid faster but demand tight verification that funds are truly collected before disbursement. Dry closings build in a buffer but extend the window during which either side might try to walk. Which model applies to you is a matter of local law and custom, not preference. Ask your settlement agent early which one governs your closing.
What Buyers Should Actually Do
The shift to wire transfers as the default payment method has turned closings into a favored target for cybercriminals. The FBI’s Internet Crime Complaint Center recorded over 9,300 real estate fraud complaints in 2024, with losses totaling approximately $174 million.6FBI. 2024 IC3 Annual Report The scheme is usually simple: a criminal compromises an agent’s or title company’s email account and sends the buyer wiring instructions that route the funds to a criminal’s bank. By the time anyone notices, the money is gone.
You can satisfy every good funds requirement and still lose your down payment to a spoofed email. Three habits protect against that outcome:
- Verify wiring instructions by phone before sending anything, using a number you obtained independently. Do not call a number embedded in the email that contains the instructions.
- Treat any last-minute change to wiring details as a red flag. Legitimate title companies almost never change bank information mid-transaction. Confirm through a separate channel before acting on the change.
- Call the title company right after you send the wire to confirm receipt. If you suspect the funds were diverted, contact your bank immediately to attempt a recall and report the incident to the FBI’s IC3 portal. Recovery odds are much better within the first 24 hours.
Beyond fraud prevention, the single biggest favor you can do yourself is to send funds early. Wire cutoff times, bank holidays, and last-minute lender adjustments all conspire against a same-day wire. Sending the money the day before closing gives the settlement agent time to confirm collection under the state’s good funds rule and leaves room to fix anything that goes sideways.
Instant Payments Through FedNow
The Federal Reserve’s FedNow Service, launched in 2023, is beginning to change how closing funds move. FedNow enables transfers that settle around the clock, every day of the year, and payments are final and irrevocable the moment they post, giving them the same legal status as Fedwire.7Federal Reserve Financial Services. FedNow Service Innovation Spotlight – Real Estate Purchases The transaction limit has been raised to $10 million, enough to cover most residential closings. Adoption among title companies is still early, but the eventual impact for buyers would be the ability to fund weekend or evening closings without worrying about wire cutoff times.
Cryptocurrency does not qualify as good funds. Escrow accounts are regulated to accept only cleared U.S. dollar funds, and no major title underwriter accepts crypto directly. A buyer wanting to use crypto holdings has to convert to dollars through a licensed payment processor first, and the converted dollars then follow the same rules as any other wire.
When Funds Do Not Arrive on Time
If a wire is a few hours late, the settlement agent simply waits. If the buyer’s funds fail entirely, the consequences move fast. The seller has cleared the house, the movers are on the road, and the rate lock is running out.
A buyer who cannot close on the agreed date has likely committed a material breach of the purchase contract. Most residential agreements include a liquidated damages provision that limits the seller’s remedy to keeping the earnest money deposit and any due diligence fee, and the seller usually cannot sue for more. If there is a dispute over who caused the failure, the earnest money may be frozen until the parties agree in writing or a court orders release.
For the buyer, the financial damage often exceeds the earnest money. A rate lock that expires during the delay can mean a higher interest rate for the life of the loan. The seller may walk and relist. If the funds failed because of a wire fraud incident or a bank error, recovery can take weeks or months. The unglamorous lesson is the one every experienced settlement agent will repeat: confirm your wire details independently, send your funds early, and do not leave any part of the process for the last possible moment.