Many younger people who are purchasing a home don’t typically write checks so they are unfamiliar with the difference between a “personal” check and a “bank” check (a bank check is also known as a “cashier’s” check). The difference between the two checks is critically important in a real estate transaction.

   A personal check is the kind of check you have in your check book. You fill out the payee information and sign the check. The funds are not immediately debited from your account and it is not guaranteed by the bank when it is issued. Accordingly, it will take at least several days for a personal check to clear. In contrast, a bank check is filled out and issued by a bank. Since the funds are verified by and guaranteed by the bank issuing the check, the funds clear almost immediately (typically within 48 hours).

   The typical Contract of Sale will allow a Buyer to use a personal check for the down payment due at contract (in contrast, a foreclosure contract usually requires a bank/cashier’s check at contract). However, at the time of closing all Contracts of Sale will require a Buyer to bring a bank check to pay the balance owed to the Seller (foreclosure contracts may require a wire). Please note that at a typical closing, the Buyer will have to bring multiple bank checks (amount owed to the Seller, a check to pay off the Seller’s mortgage and the money owed to the title company).

   Finally, to be prepared for your closing, you must always bring some personal checks to the closing so you can easily pay for smaller items (things like fuel readings and legal fees). If you don’t keep any personal checks, you need to go to your bank and obtain five or six personal checks which you can use at the closing (these checks are typically called “counter checks”).       

If you want to reduce the stress and drama at your next closing, speak with your lawyer and confirm what bank checks you need to bring and have personal checks which you can fill out to pay for smaller items.