Washington’s collected funds law requires:An escrow agent shall not make disbursements until the next business day after the business day on which the funds are deposited, unless the deposit is made in cash, by interbank electronic transfer, or in a form that permits conversion of the deposit to cash on the same day the deposit is made.

Funds deposited for escrow must conform to these requirements, i.e., funds must be in the form of a cashier’s check drawn on a Washington state bank and deposited into escrow at least 24 hours prior to closing and disbursement, unless a wire transfer is used (preferred).

Even though you may ask your bank teller for a “cashier’s check,” many times you will be given an “official check” which does not comply with these requirements. Or, you may be given a cashier’s check that is drawn on some other, out-of-state bank. Again, such an instrument does not comply with these requirements as an out-of-state cashier’s check may take several days to clear and become collected funds.

Please note that if a lender deposits its loan proceeds into escrow by check (and not by the customary wire transfer) and does so on the day of recording of documents, disbursement cannot occur until those funds have been collected by the bank after deposit. (Normally, Quality First Escrow, Inc. would not accept lender funding by check.)

In such case, payoff of existing loans, payments to mortgage brokers, seller’s proceeds, realtor’s commissions and all other disbursements from escrow will be delayed. If an FHA loan is being paid off and the closing is set for the end of the month, this disbursement delay may require payment of an additional month’s interest to the lender being paid off. When paying off an FHA loan, you should attempt to close approximately three business days prior to the end of the month to avoid paying an additional month’s interest in the payoff.

If you have questions regarding this, please contact us without delay.

* (RCW 18.44.070, eff. June 7, 1990)