Colorado’s “Good Funds” Rule: Understanding Its Impact on Real Estate Closings

Understanding Colorado Real Estate Law

In the realm of real estate transactions, it’s the finer details that often determine the smooth progression of a sale. One such nuance in Colorado’s property market is the “Good Funds” Rule. This regulation plays an integral role in ensuring the timely and secure transfer of funds during property closings. This article unpacks the Colorado “Good Funds” Rule and its influence on real estate closings.

What is the “Good Funds” Rule?

The “Good Funds” Rule is a regulatory stipulation that mandates that settlement agents in a real estate transaction can only disburse funds if those funds are collected and available for withdrawal at the time of disbursement.

In simpler terms, before the property’s keys can be handed over, the seller needs to be certain that the funds from the buyer are not just promised but are present and clear, meaning no checks bouncing or wire transfers pending.

This rule can sometimes be waived but only by the Seller in the transaction. They may waive the protections of the rule as long as the waiver is documented in writing in the closing instructions, it states that the person or entity conducting the closing, unless such person or entity is the seller, is not to handle the receipt and disbursement of funds as part of the closing, and if any holder of a lien on the property agrees to the waiver in writing. Additionally, a lien holder must agree to release the lien immediately upon receipt of a check from the closing in the amount of the outstanding debt.  

Why Was the “Good Funds” Rule Introduced?

The primary objective of this rule is to protect all parties involved in a real estate transaction:

  • Enhanced Security: By ensuring funds are available before the property changes hands, the rule minimizes the risk of fraud or insufficient fund issues.
  • Streamlined Transactions: Delays, often caused by pending funds, can derail closing timelines. This rule helps keep everything on schedule.
  • Consumer Protection: By safeguarding against potential payment issues, the rule offers added peace of mind to both buyers and sellers.

Forms of Acceptable “Good Funds”

In adherence to Colorado’s rule, the following are typically considered “good funds”:

  • Wired Funds: Funds transferred directly between banks that are immediately available.
  • Cashier’s Checks: Though they are often subject to verification and certain monetary limits.
  • Certified Checks: Issued by a bank, guaranteeing the availability of funds.
  • Official Checks: Issued by a financial institution, often used for escrow.
  • Personal or Business Checks: These are usually acceptable, but only for smaller amounts provided they can be verified.

Implications for Real Estate Transactions

Understanding the “Good Funds” Rule is paramount for a smooth real estate closing:

  • Preparation is Key: Buyers should arrange funds well in advance to ensure timely availability.
  • Enhanced Trust: Sellers can enter a transaction with confidence, knowing they’re protected from payment delays or defaults.
  • Efficiency: Real estate agents and settlement agents can operate more efficiently, leading to quicker and more streamlined closings.


Denver LawyerColorado’s “Good Funds” Rule, while a procedural detail, carries significant weight in ensuring that real estate transactions are transparent, secure, and efficient. For anyone engaged in buying or selling property in Colorado, a thorough grasp of this rule can make the difference between a seamless closing and unforeseen complications.

Delving into Colorado’s intricate real estate landscape requires seasoned expertise. If you’re navigating the complexities of property transactions, you’ll want a dedicated Colorado Real Estate Attorney by your side. At Baker Law Group, we pride ourselves on our depth of knowledge, attention to detail, and unwavering commitment to our clients.

Whether you’re seeking a Real Estate Attorney in Colorado to ensure compliance with the “Good Funds” Rule or need guidance on other real estate intricacies, we’re your trusted ally. Secure your real estate endeavors with the expertise of a Real Estate Attorney Colorado residents consistently rely on.

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