How do I conduct real estate closings now that I have to wait for the funds to clear?
Answer: As stated in S.C. Bar Ethics Advisory Op. No. 06-03 (2006), a closing attorney may disburse funds at the closing table up to the amount of deposited cash equivalents notwithstanding the fact that other cash equivalents for the same transaction have not yet been deposited. The Committee notes four areas of caution to the Bar:
First, the last sentence of Rule 1.15(f) makes it clear that the lawyer is ultimately responsible if a collected funds equivalent is not actually collected by requiring that the lawyer deposit replacement funds (presumably collected funds) in the account within five working days after notice of noncollection.
Second, lawyers should exercise great caution in accepting as collected funds equivalents items described in (iv) of Rule 1.15(f), i.e., other instruments payable at or through a bank, if $5000 or less in amount. The Committee believes that that particular collected funds equivalent should be used only in rare cases to accommodate last minute changes to closing statements or similar unforeseen circumstances and that it should not be treated as an indication that amounts less than $5000 are insignificant.
Third, in the case of loan proceeds that are wired directly into the lawyer's trust account, if the lender has not yet authorized the release of those funds (e.g., has not provided a required funding number), the lawyer should not treat those funds as collected.
It is noted that lawyers' or law firms' trust account checks are not treated as collected funds equivalents under Rule 1.15(f); hence, the somewhat common practice of treating other lawyers' or law firms' trust account checks as collected funds immediately upon deposit should be discontinued unless the check is in the amount of $5000 or less.
The Committee emphasizes that Rule 1.15 requires all funds be deposited into the account prior to disbursement. The committee also re-emphasizes the importance of closing attorneys securing funds from an established source, considering the history of crises in the mortgage industry, including ongoing issues of insolvency and instability.