Home-buying ING account holders: read this if you are wiring money to escrow

I’ve been practicing real estate since 2001, and after 10 1/2 years in the business, when I learn something new I like to share it with those who might find it useful or interesting. In that vein, I found out something about ING Direct online banking recently and it’s worth filing under “good to know” for future use.

First, a little context and background about the points at which a buyer puts money into escrow during his purchase transaction: a buyer’s offer is submitted along with a good faith deposit, which can be a personal check. When the offer is accepted, that check is deposited into escrow and is used as part of the down payment and closing costs. Close to the end of the transaction, the lender tells the buyer the total amount needed to close the purchase — the balance of the closing costs plus down payment, minus any credits that the buyer might be getting from the seller.

ING Direct online banking  (but no direct wire transfers!)

Because of the California Good Funds Law, this final deposit into escrow must be in the form of a wire or a cashier’s check. According to the California Department of Real Estate: “It is important to know that escrow officers only authorize recording of the closing documents when all funds on deposit have been collected and cleared. The so-called “Good Funds Law†in California, found in Section 12413.1 of the California Insurance Code, requires that a controlled escrow company and a title company must have in possession sufficient good funds in order to close a real estate transaction.”

This is where the ING Direct online banking situation occurred: One of my fantastic buyer clients, who responded to every request from his mortgage broker with complete documentation in record time, planned to transfer his final funds to escrow from his ING Direct account. But, no. It turns out that ING Direct wouldn’t transfer the money to an escrow company account, only to another account held by the ING account holder.

Really? Yes.

What’s the answer? This particular client also has an account at Bank of America, so he set up a wire transfer from his ING Direct account to BofA. ING Direct told him the transfer could take up to 24 hours. Not true: it hit his BofA account in 2 hours. Then he set up another transfer from BofA to escrow. The BofA agent told him it could take up to 48 hours to reach the escrow company’s account. Both of these banks must have taken a healthy dose of their “underpromise and overdeliver” pills, because it took less than an hour for his funds to reach the escrow company.

And we closed on time.

Moral of this story: if you have an online bank account – like ING direct – check with the bank when you get into escrow to find out how they let you get your hands on your own money.