Keep A Tight Leash on Cashier’s Checks

One of the requirements for buyers making offers on properties that are being sold through probate sales with court confirmation is that you have to submit a cashier’s check for 10% of your offer price. It’s important to know the details about cashier’s checks so you don’t end up losing access to your funds temporarily.

Probate sales with court confirmation (click here for an overview) have been going on for many, many years—well before the go-go San Francisco housing market kicked in. A buyer would make an offer, include the check, and the sale would progress.

These days, however, homes being sold in this manner in desirable neighborhoods can easily fetch five or more offers. And that means five or more buyers will go to their banks and get cashier’s checks for large amounts of money. That’s a lot of checks floating around. So it’s important to be aware of what’s at stake when you get a cashier’s check from your bank, and what exactly happens during the sale process.

First, you’re obtaining a cashier’s check made out to an estate or conservatorship. There is usually a fee of approximately $25 to obtain the check. The bank then debits your account in the amount of the cashier’s check, and assumes responsibility for covering that check in the event it is cashed.

You hand over your check to your real estate agent, who is supposed to record possession of the check in a trust fund log at his or her office.

Your agent then delivers your offer package and check to the listing office. Someone on staff at that office should also be logging the receipt of the check. The listing agent and executor/seller review offers and then the prevailing buyer signs his or her check over to the title company. The check sits in an escrow account for one or two months in anticipation of the court date, and is void after 90 days of being issued.

But what about the buyers who haven’t “won” the right to get their contract to the court date? The listing office releases the checks to all the other buyers, who can either pick the check up in person (probably the best way to proceed), or have their agent do so. The absolute next step is to take the check back to the bank and make a “deposit,” so the bank can reinstate the funds in your account.

Here’s the critical factor: In the event the check is lost, stolen or destroyed in the interim, you are then required to wait a period of 90 days from the issuing date on the check before the bank will reinstate the funds in your account. Again, that’s because the bank is taking responsibility for covering the amount of the cashier’s check in the event that it’s cashed. If you suddenly don’t have access to, say, $70,000, that could put a real crimp in your house hunt for three months.

You may have gotten the sense that I’m not a big fan of this process. I think exposing so many individual buyers to financial risk is really unnecessary and is an outdated procedure that should be changed. There’s no reason buyers can’t submit proof of deposit funds with an offer, with the prevailing buyer getting the cashier’s check to the title company. Not only does the existing process cause a lot of people to run around for nothing, it also increases the chance that a check can be lost.

I can’t singlehandedly change the probate listing procedures, but I can advise you that you need to keep a close eye on the whereabouts of your cashier’s check at all times. And once you know the outcome of the offer situation, either deposit the check with your bank, or sign it over to the title company.

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