Without a doubt, this is one of the most frequent questions that our clients ask, and it is also one of the questions most addressed on the expat sites or international sites that exist on Facebook.
So I am going to give you my opinion and recommendation with regard to this question.
Just in case someone doesn’t know what a banker’s draft is, I’ll explain it to you.
“A banker’s draft is not the traditional cheque that has been used for years to pay for things. “
WHAT IS A BANKER’S DRAFT
A banker’s draft is not the traditional cheque that has been used for years to pay for things. (Today one rarely sees people using these traditional cheques)
In Spain these cheques are called nominative cheques, and an important characteristic that they have is that when the person goes to cash them often THERE ARE NO FUNDS TO MEET THE PAYMENT. When this happens, in addition to generating some bank charges for the bounced cheque, if you want to get paid many times you would have to start legal proceedings.
Today, these types of cheques are seldom used, precisely because of the lack of guarantee that you will definitely get paid.
These cheques have nothing to do with BANKER’S DRAFTS.
As its name indicates, a banker’s draft is issued by the BANK. Therefore, the funds come directly out of the bank’s account and not directly out of your account.
This means that the cheque is GUARANTEED BY THE FUNDS THAT ARE RESERVED TO MEET THE PAYMENT.
Obviously in order for the bank to issue a banker’s draft, they have already taken the funds from your account. Therefore, once the funds have been transferred to the bank’s account, they can issue a CHEQUE THAT WILL GUARANTEE THE FUNDS, ONE HUNDRED PERCENT.
IN OTHER WORDS, A BANKER’S DRAFT IS THE EQUIVALENT TO HANDING OVER CASH.
However, there is a drawback.
First, there is the commission that the Bank will charge for issuing the cheque.
This commission depends on the type of account you have.
If it is a NON RESIDENT ACCOUNT, the commission will be higher than if it is a RESIDENTS ACCOUNT.
Each bank has their own scale of commission, but it is negotiable.
In order to get the commission reduced as low as possible, it wouldn’t do you any harm to cry poverty when you are talking to the bank manager.
Secondly, when you are on the receiving end of the Banker’s Draft, your bank could also charge commission when you pay the cheque in, especially if the bank the cheque has been drawn on is not the same bank as yours.
Once again, it depends on the rules and regulations of each bank.
When you pay the banker’s draft into your account the funds aren’t immediately available, they can take a day or two to clear (unless the cheque is issued from the same bank as yours).
BANK TRANSFERS AND RATES
As already mentioned, there is also the possibility of being paid by bank transfer.
There are two different types of bank transfers.
The first type is a normal transfer (it takes a day or two to arrive from one bank to another).
The second type is an OME transfer (‘orden de movimientos de fondos’ which means, an order to move funds). This is an immediate transfer and arrives in the destined account immediately, on the same day.
Evidently and as you can imagine, it is a transfer that generates more expensive bank charges than those of a normal transfer.
In both cases, there are bank charges, the OME being the highest due to the importance of it being of an instantaneous nature.
How high can these bank charges be? Well, the same as with the banker’s drafts it depends on the Bank and the type of account you have. Therefore, you need to ask your bank how much each system of payment will cost you.
WHICH IS THE BEST WHEN I AM SELLING MY PROPERTY?
Now that you have all of the above information, I am going to give my professional opinion on which is the best.
I always advise that the payment to the Seller be done via A BANKER’S DRAFT handed over in the Notary’s office.
The reason is, that when you are in the Notary’s office ready to sign, a multitude of unforeseen problems can occur which could lead to the SINGING OF THE DEEDS NOT BEING ABLE TO TAKE PLACE on that day.
It could be that a document is missing at the last minute, that one of the people signing has fallen ill and can’t attend the signing, the Notary may not be able to attend the signing, or if there is a mortgage, the person representing the bank has had a last minute problem and can’t attend the signing.
As you can see, there are many reasons for the postponement of the signing of the deeds of sale.
In the case of one of the above situations arising, if there is a banker’s draft it won’t be handed over to the seller until the deeds are signed.
If the sale should be completely aborted, the banker’s draft can just be given back to the bank and they will return the funds to the account and also refund the bank charges they charged for issuing it.
If everything goes to plan, at the precise moment in the Notary’s office that the keys are handed over to the buyer, the cheque is also handed over to the seller.
The problems have been solved. The procedure has been successfully carried out.
However, imagine that a TRANSFER has been done that same day and at the Notary’s office the completion was unable to be finalised and the deeds could not be signed. NOW WHAT?? You, as the seller, have to go to your bank, and do a new transfer to give the funds back to the buyer, who will keep them until the new date for the completion has been set.
I’m sure you can see who the winner is in all of this, the bank! They always charge for every transaction they carry out.
There is also the anxiety for the buyer, whose money is in the seller’s account and whom he has to trust to return it to him.
And if it isn’t returned and the completion does not take place what happens? Imagine the problems that this poses.
For this reason, when the funds are in a BANKER’S DRAFT, none of these situations will arise. The cheque is handed over when the property is signed for and it doesn’t get handed over if EVERYTHING IS NOT IN ORDER.
To sum up, the costs of transfers and banker’s drafts are negotiable…….. and it could even work out that the cost of an OMF transfer is the same as the cost of the issuing of a banker’s draft.
For peace of mind and for the security of both parties who are taking part in a sale and purchase of a property, my advice is use a BANKER’S DRAFT.
You can’t put a price on your peace of mind.
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