You’ve spent weeks scrolling through listings, running numbers on spreadsheets, and driving by properties at all hours. Finally, you find it: the one. It’s perfect. You’re ready to make your move. You call your agent, heart pounding, and they tell you the seller is only accepting offers with the Earnest Money Deposit in guaranteed funds. The momentum stops. A personal check won’t cut it. What now?
This moment of confusing jargon is where many deals stall. But it’s also your first opportunity to stand out. The solution is a simple but powerful financial tool the Demand Draft. In the United States, you’ll almost always hear this referred to by its specific name, the Cashier’s Check, but understanding the core concept of a Demand Draft—a payment guaranteed by a bankis what will give you a powerful edge.
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What is Demand Draft?
A demand draft is a pre-paid instrument issued by a bank, guaranteeing the funds on behalf of the payer. Unlike a personal check, which is drawn against your personal account balance, a demand draft is drawn against the bank’s own funds. When you request one, the bank first collects the money from you. It then issues a draft, which becomes a direct liability of the bank. This means the payment cannot bounce, making it a highly secure form of payment.
Key Attributes
- Bank-Guaranteed: The funds are secured by the issuing bank, not an individual account holder.
- Pre-Paid: You must pay the bank the full amount of the draft (plus a small fee) before it is issued.
- Payable on Demand: The draft is payable to a specific person or entity upon presentation, with no risk of being dishonored for insufficient funds.
For practical purposes in U.S. real estate, the most common type of demand draft you will use is a Cashier’s Check. Think of “Demand Draft” as the category and “Cashier’s Check” as the specific product you’ll ask for at the bank.
| Feature | Personal Check | Demand Draft / Cashier’s Check |
| Funds Source | Your Personal Account | Bank’s Account (Pre-Funded) |
| Bounce Risk | Yes | No (Guaranteed) |
| Seller Confidence | Low to Moderate | Very High |
| Best Use Case | Everyday Expenses | Real Estate Offers & Closings |
Why a Demand Draft is Important in Real Estate
For a new real estate investor, using a demand draft is a strategic move that communicates professionalism and financial readiness. It’s a small detail that can have a major impact on your success.
Eliminates Risk for the Seller
Sellers take a huge risk when they accept an offer and take their property off the market. A bounced deposit check can derail a transaction, wasting weeks of valuable time. A demand draft removes that fear entirely, making your offer instantly more secure and attractive.
Makes Your Offer Stronger
In a competitive market, you need every advantage. Imagine a seller has two identical offers for $300,000. Offer A includes a personal check. Offer B includes a guaranteed demand. Which buyer looks more prepared, professional, and less likely to cause problems? You do. This small detail can be the deciding factor that gets your offer accepted.
Essential for Key Transactions
You will need to use a demand draft or another form of guaranteed funds at two critical points in nearly every real estate deal:
- The Earnest Money Deposit (EMD): This is the “good faith” deposit you submit with your initial offer.
- The Closing Table: Your final down payment and closing costs must be paid with guaranteed funds.
How to Get a Demand Draft (or Cashier’s Check)
Getting a demand draft is a straightforward process. Follow these steps to ensure it goes smoothly.
Pro-Tip: Call Your Bank First. Before you go, call your branch to ask about their cutoff time for issuing cashier’s checks and confirm the fee (usually 10−10−20). Missing the cutoff can delay your offer, and you don’t want that!
- Get Exact Payee Info: Obtain the exact legal name of the payee (e.g., “First American Title Insurance Company”) and the precise amount from your agent or the title company. There is no room for error.
- Go to Your Bank (In Person): You must visit a physical branch of your bank.
- Make the Request: Approach a teller and tell them you need a “Cashier’s Check.” This is the specific name for the demand draft they will understand and issue.
- Provide Funds & Details: The teller will withdraw the funds directly from your account (plus the fee) and ask you to confirm the payee information and amount.
- Secure the Draft: The teller will print the official demand draft. Treat this document like cash. Keep it in a safe place until you are ready to deliver it.
FAQs: Demand Draft
What if the deal falls through after I’ve submitted the Demand Draft?
Your funds are safe. If the deal is cancelled for a reason protected in your contract (like a bad inspection), the escrow or title company is obligated to return your Earnest Money. If you get the physical demand draft back, simply take it to the bank that issued it. They will cancel it and deposit the full amount back into your account.
What happens if I lose a Demand Draft?
Contact your bank immediately. The funds are not lost forever, but the process to replace a lost cashier’s check can be a hassle. It may require you to sign an indemnity bond (a promise to pay the bank back if the original draft is somehow cashed) and wait for a period before a new one is issued.
Is a wire transfer better than a Demand Draft?
Both are secure forms of guaranteed funds, but they serve different purposes. A cashier’s check is best for delivering your earnest money deposit with your signed offer, while a wire transfer is typically used for sending your larger down payment and closing costs directly to the title company.
Conclusion
A demand draft isn’t just a piece of paper it’s a strategic move. It communicates seriousness, preparation, and financial strength. three things every seller wants to see. You’ve now mastered a crucial detail that many rookie investors overlook. By walking in with guaranteed funds, you’re not just making an offer; you’re making a statement that you are ready to close.
