Can You Buy Property With Cash or a Money Order?

by Patrick Gleeson, Ph. D., Registered Investment Adv
The Federal Reserve estimates that one in 10,000 pieces of paper currency is counterfeit.

It's theoretically possible to buy property with cash, although for a number of reasons, it's not practical. Buying property with a money order has many of the same limitations as buying with cash and introduces additional complications, including subjecting the buyer to the seller's suspicions of fraud.

Bringing Actual Cash to the Closing

Bringing cash to a real estate closing may be a bad idea for several reasons. First, if you hand the money over to the seller directly, you could be robbed. If you're going through a licensed Realtor, your odds of robbery diminish, but, as financial writer Luke Landes points out in "Consumerism Commentary," you are handing over tens of thousands of dollars, and all you'll have to show for it is a handwritten receipt. The Realtor is unlikely to confirm a sale with signed documents until the legitimacy of the money is confirmed by the bank. A licensed Realtor may not accept the cash anyway, for fear of being implicated in money laundering.

Bringing Cash to the Bank

If you want to buy the property with cash, you may be better off bringing the cash to a bank first, opening an account, depositing the money and writing the seller a check. There may still be issues. Any transaction involving $10,000 or more in cash requires the bank to file a Currency Transaction Report with the Financial Crimes Enforcement Network, or FinCEN, a division of the U.S. Treasury, then send the IRS a copy. If bank personnel are concerned about the source of your money -- which they may be with a new depositor who opens an account with tens of thousands in cash -- they may file a Suspicious Activity Report with FinCEN. Note also that the bank may put a hold on the money until the transaction clears a FinCEN investigation.

Paying with a USPS Money Order

It's possible to pay with a money order, but paying with a check or wire transfer may be less troublesome. A U.S. Postal Service money order deposited with a bank will clear no faster and may arouse the suspicion of the seller or his agent -- the U.S. Postal Service has issued several alerts about fraud related to postal and other money orders. Also, the process will likely slow down considerably while the legitimacy of the money order is confirmed. Note that if a customer deposits money orders that are subsequently found to be counterfeit, the depositor is responsible for the loss, not the bank. This may motivate the seller to proceed cautiously and slowly.

Other Money Orders

Money orders issued by other institutions, such as MoneyGram and Western Union, have issues related to fraud similar to USPS money orders. Also note that if the seller attempts to cash in money orders at one of these institutions -- Western Union, for example -- with a total value equaling the sales price of a house, what the seller will get back isn't cash, but a Western Union check. If you're the buyer, it would save everyone's time simply to open a bank account, deposit the cash and write the seller a check he wouldn't have to go to Western Union to receive.

About the Author

Patrick Gleeson received a doctorate in 18th century English literature at the University of Washington. He served as a professor of English at the University of Victoria and was head of freshman English at San Francisco State University. Gleeson is the director of technical publications for McClarie Group and manages an investment fund. He is a Registered Investment Advisor.

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