During a real estate transaction, you’ve likely experienced several different ways in which buyers have paid earnest money deposits, closing costs, and other related fees. Thanks to advancing technology, there are now several methods of electronic payments buyers can use to transfer money. And although they have been around for quite a long time, ACH transfers and wire transfers have become increasingly popular, as they are more convenient than having to ego and get cashier’s checks.
However, one of the above electronic payment methods is actually more ideally suited to real estate transactions than the other, for a variety of reasons. Before you can truly understand and appreciate why it is best to learn a little bit more about each type of transfer.
A wire transfer is a type of transfer in which funds from one bank are transferred to an account at another bank or financial institution. The funds are transferred from one bank to another using a wire transfer service. This method of sending money is often instant, which makes it a good choice for sending large amounts of money as a payment option. However, as you will learn shortly, just because the funds can be sent and received quickly, it is not actually the best electronic payment option for real estate transactions.
What is an ACH payment?
ACH stands for automated clearing house, which is the processor for this type of transfer. ACH payments are sent through a national network and processed. ACH payment options take a little longer for the funds from one bank to be delivered to another financial institution because as they are being processed, they are subject to more security regulations. So, although ACH payments are not always as fast as a wire transfer, they are still a much better alternative option than paper checks, which are inconvenient and not as safe from fraudulent activity.
The ability to have earnest money payments and other fees sent and received as easily as possible helps to facilitate the real estate transaction process and keep things moving as scheduled. In this aspect, the ACH payment option is clearly the better choice, especially when using a secure method for sending money such as paymints.io.
Paymints.io is an intuitive platform for sending money that enables you to quickly and easily request ACH payments from an individual. Using a payment system like this eliminates the need for an individual to go to the bank or to spend time trying to set up a way to transfer money online.
Wire transfers also usually have to be set up with your bank, which can be a time-consuming and frustrating process when you’re trying to get things done quickly. It also means the buyer needs to find time to travel to the bank as well, further delaying things.
With an ACH payment option like paymints.io already set up, you can request money automatically, and the buyer can send money instantly from the comfort of their own couch, using a computer or mobile device. Wire transfer options do not allow you to send requests for money.
As mentioned above, wire transfers are often transferred within one day, while many ACH transfers can take 1-3 days. However, many advanced ACH processing systems are now managing to move money in as little as one day.
The quicker speed of a wire transfer comes at a cost, however, and this method of moving money simply isn’t worth it for real estate transactions where buyers are already worried about closing costs and other fees, not to mention security, which is also a high concern in the real estate industry.
Electronic Payment Fees
ACH money transfers are usually free for the sender, but even if there is a fee, the fees to move money via a wire transfer are typically much higher than the fees for sending money with an ACH transfer. International transfers with a wire transfer payment option are even more expensive. When a buyer is trying to save money on closing costs, the last thing they want to do is pay more money simply to make an earnest money deposit or other payments.
Another one of the most important reasons ACH payments are a better payment option than wire transfers for real estate transactions is because they are much more secure, especially when using paymints.io, which utilizes bank-level encryption and advanced identification security protocols.
Real estate fraud is an increasingly growing problem as cybercriminals and identity thieves continually target both real estate professionals and buyers and sellers. The real estate industry is particularly attractive to cybercriminals because of the large amounts of money involved in a transaction and because a lot of personal and financial information is sent between the various parties via email.
Fraudulent activities using cashier’s checks and wire transfers of earnest money deposits or down payments are a common scam, costing consumers billions over the last few years.
As mentioned above, because ACH processing is done at a clearinghouse, where they are subject to more rules and regulations, they are much more secure. Additionally, if fraudulent activity is discovered in time, the payment can be reversed. Wire transfers cannot be reversed, nor are they scrutinized as much as ACH transfers. Using a secure ACH payment option significantly reduces the chances of fraudulent activity.
With the exception of being a quicker way to move money, wire transfers simply aren’t the best electronic payment option for real estate transactions. Security, fewer fees, and more convenience are much more important in the real estate industry, making it a must-have payment option for your clients to utilize when involved in a real estate transaction.
To help your clients better understand more about these types of transfers and other aspects of the real estate mortgage process, you can direct them to visit online forums and blogs to learn more about costs, fees, and the answers to any other questions they may have.
Paymints.io is a fully electronic, secure, and compliant solution that eliminates the need for borrowers, buyers, sellers, and real estate agents to write paper checks. Our goal is to save you time, by avoiding lines at the bank; money, by lowering fees; and saving the environment by eliminating the use of paper and reducing CO2 emissions.