When it comes to real estate transactions, there can be an almost overwhelming amount of options available to use. For brokers, agents, and title companies, two of the most prominent of these options are RTP — or real time payments — and money orders. You’ve no doubt heard of them each individually, but what are the key differences between the two, and which one is the better option for a real estate transaction? Let’s compare the two and look at what makes each one worth using, then make a final decision.
An RTP is a transfer of money from one person to another person that is initiated and settled in a matter of seconds. These payments travel over what’s called a real time payments rail, and, ideally, they can be made any hour of the day, any day of the year — including both weekends and holidays. RTPs combine immediate access to funds, instant settlements, and rapid confirmations, making them a highly sought-after payment solution for those who need to send or receive money fast.
With so many digital payment solutions out there, there’s value in a money order’s tangibility. Similar to a check, money orders are a paper payment — however, unlike checks, money orders guarantee funds. They can’t bounce like a check can because money orders have to be purchased with a guaranteed payment form (like cash, a debit card, or a traveler’s check). Once a money order has been purchased, they are delivered by mail or by hand to the recipient, cutting the digital world out of the equation completely.
To truly assess the value of an RTP, let’s examine the pros and the cons. From there, these pros and cons can be compared to those of a money order for making real estate transactions.
When you need to make a real estate transaction fast, a real time payment is the winning solution: Over $10 billion was sent via RTP in 2020 alone, with that number expected to hit $13 billion by the end of 2021. The instant gratification that RTPs provide is a huge positive for brokers, agents, and title companies looking to make an instant payment and get the money from the buyer to the seller as soon as possible. The liquidity that these RTPs can bring simply can’t be beaten.
One potential downside to RTPs is the fact that some of the smaller, weaker RTP services are susceptible to potentially serious security flaws in their infrastructure. This isn’t the case for RTP services who have taken the time and the effort to iron out all the kinks and seal all the vulnerable areas, but can still pose a serious threat for cyber criminals to take advantage of. All in all, though, RTP services that have proven themselves to be secure are nothing to worry about in this regard.
Now that the pros and cons of a real time payment are understood, let’s do the same for a money order. From there, it’ll become clear which payment solution makes the most sense for the purpose of real estate transactions.
First and foremost, the greatest advantage of a money order is the security and peace of mind they provide to brokers, agents, and title companies. Not only are money orders a guaranteed form of payment that cannot bounce, but they also need the recipient’s name and the issuing institution’s name — this makes them nearly impossible to duplicate or intercept and results in a payment solution a lot more secure than many digital payments. With over 285,000 money orders sent a day, it’s clear to see how trusted they are.
Now, the biggest and most obvious downside to money orders is the simple fact that they take time. The sender has to go to their preferred financial institution, purchase the money order, and then deliver it by hand or by mail to the recipient. From there, the recipient has to then cash or deposit the money order and wait for the funds to hit their account. This is the price you have to pay for the security and dependability of a money order, it seems. Still, with over 77 million money orders sent in 2020 alone, the pros seem to make up for the cons.
At the end of the day, the pros and cons of RTPs and money orders seem to be evenly weighted. For the purpose of real estate transactions, speed is the most significant factor to consider. It’s clear to see that RTPs are much faster than money orders, while money orders take time to arrive to the recipient. If you’re looking to make a real estate transaction fast, you can’t go wrong with an RTP. If you don’t mind waiting, then there’s nothing wrong with opting for a money order.
Interestingly enough, paymints.io splits the difference between the two: It’s a fully electronic, completely secure, and totally compliant solution that gets rid of the need for borrowers, buyers, sellers, and real estate agents to write paper checks. If you’re interested in trying out paymints.io, consider scheduling a demo today!