Tuesday, March 28, 2023

There are commonly three or four banks involved in every real estate closing. The buyer often delivers funds from a bank account to purchase a home, condominium, or investment property. The closing attorney uses a bank account to receive money from many sources for closing, pay off a mortgage loan, and pay the seller the balance. The seller often uses a bank account to receive money from the sale. The real estate agent uses bank accounts to hold in escrow purchase and sale deposits and deposit their own commissions.

What would have happened if Silicon Valley Bank (SVB) had been one of these four banks? What if SVB was providing you or your buyer with a mortgage loan on the day the FDIC shut down the bank – and it couldn’t fund the mortgage loan? The buyer could be placed in default and lose their deposit. The seller might not receive funds from the sale to purchase a new home. And the broker wouldn’t be paid.

Most importantly, what if SVB was the bank the law firm was using to receive and hold all the funds for your closing, pay off all mortgages, and conduct the closing – on the day the FDIC stepped in and closed the bank?

There are many unforeseen consequences and uncertainties when the FDIC shuts down a bank, even if a person’s funds are only temporarily tied up. With a little advance planning, potential calamities can be avoided.


There is a 97% chance the FDIC will shut down a bank on a Friday. I reviewed the most recent 100 bank failures from the FDIC’s records. With three exceptions, the FDIC closed each bank on a Friday. If your purchase or sale occurs on a Friday, the money could get trapped in an FDIC bank shutdown.

One answer is simple. Don’t Schedule your closing for a Friday! And avoid Thursdays as well, since closings often extend an extra day before they are completed. If you schedule your closing on a Tuesday or Wednesday, your closing should be safely distant from FDIC action 97% of the time, according to our data.

By avoiding Fridays, the most common closing day, you also avoid the risk of a delay in recording the deed that prevents the buyer from moving into the property until the following Monday.

Warshaw Di Carlo & Associates is always thinking about how to avoid problems, not create them. We’re real estate attorneys, estate planners, and forward thinkers.

We represent buyers and sellers of homes and condominiums and investment properties and create trusts that protect our clients interests and identities.

If you would like more information about the FDIC or the data, please contact the author of this article, George Warshaw, at gwarshaw@warshawlaw.com. (617)262-7800.

We welcome new clients.

© George Warshaw 2023. All rights reserved.

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