Cheques that don’t clear on time are a possible cause of settlement delays – and unhappy clients.
When the deposit paid on a property is greater than your commission, the extra amount makes up part of the purchase price and should be sent on to the seller’s settlement agent once the contract goes unconditional.
Most agents are well aware of this, but occasionally the matter slips through the cracks – and if the cheque is sent through too late, it can delay settlement.
For example, while acting as the settlement agent for a seller, we didn’t receive the cheque for deposit less commissions, which was a personal cheque, until the day before settlement.
It cleared five days later, two days after the three days grace period, which would usually make the seller liable to pay penalty interest.
Fortunately, both parties had already agreed on an extension to account for an unrelated issue, and penalty interest wasn’t charged. In other circumstances, this could have been a costly hitch in the transaction.
To avoid a delay, keep in mind that cheques take around three or five days to clear, depending on the type of cheque. By sending in the deposit less commission cheque in a timely manner, you maximise the chance of a timely settlement and happy clients.
Image by David Goehring via Flickr.