So after looking high and low for their dream home, your clients have finally found it. Now what? Well, now it’s time to make an offer and send in the earnest money. But before you prepare to collect a check to send to the escrow account, think about the very real possibility that it will bounce, delaying the home-buying process and discouraging the seller from moving forward with the sale.
This sounds like a worst-case scenario, right? Unfortunately, bounced checks happen all too often, but the good news is that you can prevent them by encouraging your clients to make electronic payments instead of using checks. Here’s why you should:
What Effect Do Bounced Checks Have on the Real Estate Process?
Bouncing a check is never a good thing, but there can be devastating effects when a buyer’s check bounces. The consequences range from delaying the closing process to missing out on the house entirely. So as a real estate professional, it’s a pretty big deal to avoid bounced checks.
After all, buyers will have to send in payments at certain points along the way when trying to buy a home. It starts with earnest money and ends in closing costs, which can include fees for the appraisal, home inspection, title search, homeowner’s insurance and other necessities. Basically, buyers can expect to write multiple checks to get their dream house, unless they take advantage of simpler options like electronic payments.
So what happens when a check bounces during a real estate transaction? Sometimes, the bank will cover the deficiency if the client doesn’t have a habit of bouncing checks. But if the bank returns the check because of insufficient funds, it’s important to contact the seller to explain the situation and have them send another form of payment right away. Otherwise, the seller could question just how serious the buyer is — and whether they can afford the house.
Of course, if the buyer bounces a few checks during the real estate process, they stand a good chance of losing the house altogether. The seller might move on to the next offer if they think this deal could fall through, and the lender might even become concerned enough to cancel the home loan proceedings if it’s clear the buyer is having financial issues.
You don’t want this to happen to your buyer. Bounced checks can create a headache for buyers, sellers, lenders and real estate professionals, as they take both time and money to deal with. Fortunately, you can avoid the risk of bounced checks by submitting all payments electronically via the Automated Clearing House (ACH), such as through paymints.io. This way, you have access to a secure money transfer platform that ensures the buyer has money in their account before paying real estate costs.
Why Are ACH Payments Preferred to Checks?
Personal checks have been a popular way to pay bills since the 1700s. While that may be an impressive length of time, it also tells you how outdated this practice is. Checks have gotten slightly more secure since then as banking has changed, but there’s still the possibility of bounced checks — so the system isn’t without its flaws. Why not use the latest technology to pay for real estate costs instead of sticking with a method of payment that’s been around for centuries?
Today, paper checks just aren’t that convenient or fast. Most people don’t walk around with checks in their pocket, so they have to know ahead of time — and remember to bring their checkbook — if they’re going to pay real estate expenses with a check.
And they’re definitely not the fastest form of payment. Sure, the check might show up the same day in an account when it’s deposited, but the money isn’t usually available right away. That’s because the bank has to first verify that the person who wrote the check has that amount in their account. This can take anywhere from a few days to three weeks. In the meantime, the bank is fronting the money on the assumption that the check is valid. The minute the bank discovers that it’s not, it can take the money away.
That’s a big problem for the person who deposits the check and assumes it’s valid. It might not bounce for weeks, and the recipient could spend the money assuming the check was valid. When the bank finally revokes the funds, any checks that person wrote may bounce, resulting in fees and embarrassment.
It’s better to use ACH payments vs. checks, as the bank can verify and clear ACH payments on the same day rather than just fronting hundreds or even thousands of dollars for up to a few weeks. This eliminates the bounced check issue during any real estate transaction.
The Benefits of ACH vs. Checks at Closing
Clearly, ACH payments have the advantage of faster verification, so you no longer have to worry about bounced checks when your buyers are trying to close on a house. As a result, there’s less of a chance of the sale being delayed or completely cancelled. This reduces the odds of you, the buyer and the seller wasting your time and money.
That’s an enormous benefit to look forward to when you use paymints.io for real estate transactions. When buyers know the payment they made has already cleared, they will feel confident that they’ve completed the first step toward buying a house. This means they can focus their attention on other tasks during the buying process, like picking a theme and paint colors for their new home. And when the sellers receive notification that the ACH payment has cleared, they will know for certain it’s a serious offer and can focus on planning their upcoming move.
Of course, there are some additional benefits of using ACH payments over checks. For example, digital payments are not only faster to clear but also easier to initiate. There’s no need for your clients to bring a checkbook when they see a house they want to make an offer on. They can simply let you know they’re ready to make the offer, and you can collect the earnest money within minutes through paymints.io — without having to deal with paper checks.
And as with all technology, paymints.io makes record-keeping easy, as you can track the transaction along the way. Unlike paper checks, there’s no risk of an electronic payment getting lost or stolen on the way to its destination, and you don’t have to rely on someone to deliver it safely on time. With paymints.io, you’ll watch the payment go through a proprietary ACH platform that will move the money right from the buyer’s checking account to the escrow account to be verified in real time at the end of the transfer.
If this sounds convenient and you think the buyers and sellers you work with will appreciate the ease and security of paymints.io, contact us to learn more. You can schedule a demo and get started today.
