Spotlight on the Ohio Good Funds Law
Changes go into effect April 6, 2017
Revisions have been made to Ohio’s Good Funds Law that go into effect on April 6, 2017. The Good Funds Law applies to escrow/title agents and prescribes what funds can be accepted for disbursement at a real estate closing. The changes to the law can affect the way you do business and how you prepare your clients for closing.
The Ohio Land Title Association has prepared a series of FAQs to help in the understanding of how the changes to the law will affect real estate transactions. With their permission, CABR will present a series of Q&A’s in the CABR News to help you prepare for the changes.
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Q: With the increase in wire fraud, doesn’t this make it riskier for the consumer?
A: If the proper procedures are put into place to make sure that any wire instructions are provided in person or verified by the parties prior to being sent, the risk of not having funds available for disbursement or being told they did not clear, post-closing, stop the consumer from being harmed. Fraudulent Certified Checks and Cashiers Check pose a greater risk to the consumer than a wire.
Q: Bank branches set limits on the amounts that can be wired from a consumer account.
A: It seems like mobile banking limits the amount that can be wired from an account but not an actual branch visit in order to initiate the wire, although this may vary by bank. We have also instructed the agents to let their customers know when the order is opened, that the money needed from all parties will need to be in the form of a wire for any amount over $1,000, so they need to check with their bank to see what that banks policy is on sending wires. If they will only be able to send increments of the total each day, they will need to start the process early in order to have the full amount of any funds needed on the day of disbursement.
Q: Does the new law apply to escrow funds pertaining to out of state transactions?
A: If the money for this transaction will be received and disbursed from the Ohio IOTA account, then it will have to follow this law. The only exception to this would be for a Commercial transaction, as this does not apply to commercial deals.
Q: Does the statute totally prohibit the taking of all but the enumerated checks or can we take checks as long as no disbursement is made from the escrow account until that check has cleared, in other words, if I get an earnest money deposit of $10,000.00 in check form but my transaction is not closing for 60 days, and there will be no disbursement on that file for 60 days can I accept that check?
A: Unless the funds are for Earnest Money and those funds were sent to us from the Real Estate Broker from the Real Estate Brokers Trust account, all deposits will need to be in the form of a wire. The above scenario is most likely to happen in a commercial transaction though, which would not be covered by this rule.
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