Good Afternoon —
A comment I frequently hear from those in the title industry is this goal to "streamline the closing process." Those who have purchased a home know that the closing process can be slow and cumbersome especially if something unexpected pops up.
At the moment, there are all sorts of document management, eSignature and RON platforms available to those in the industry, and while real estate, title, and closing agents have told me that they are helpful and time saving, at the end of the day the main action at a closing is one party paying another and receiving the keys to a home.
Funds for a down payment or the entire cost of the property in an all-cash transaction are typically provided in the form of a certified check, an automated clearing house (ACH) transfer or a wire transfer. Depending on the banks used by the parties, certified checks can take one to two business days to clear, while ACH transfers can take up to two days to complete and wire transfers can only be completed during banking hours.
All of these payment methods can obviously slow down the closing process and, in the case of wire transfers, limit the hours during which a closing can occur. Real-time payments, however, are an instant form of money transfer. Currently, RTP is used occasionally in homebuying transactions, but in April, the maximum amount you can send via RTP is increasing from $100,000 to $1 million. This would clearly increase the utility of RTP in real estate.
With RTP, the transaction is completed instantly no matter the day of the week or the time of day and the receiver can immediately use the funds. In addition, while many banks charge various fees for sending and receiving wire transfers ranging from $15-$30, RTP typically costs just a few cents to send and receive.
Another concern is wire fraud, but Rick Bruhn, the head of commercial deposit and payment solutions at U.S. Bank, says that RTP can greatly reduce wire fraud worries.
"Wire fraud has been running rampant in the title and real estate settlement industries for the last several years," Bruhn said. "If the party getting paid sends a request for payment on the same RTP rail as the one they will be getting the fund from, the risk of wire fraud is drastically reduced. Since the payment happens in real time, you don't have to do this ahead of the closing, you can do it right at the closing when everyone is together and it is even more secure."
While the real estate industry is still a way off from purchasing a home via an Amazon checkout like experience, Bruhn said RTP can really open up the possibilities of when and where you can close on a home.
"With wider remote online notarization acceptance and eSignature capabilities, if your title or closing agent sends a request for payment to the client, who then sends an RTP back, you could do the whole closings at 6pm at night at a Starbucks or 7:30 on a Sunday morning while you are sitting on your sofa with a cup of coffee."
But I want to hear from you. Tell me about your RTP experiences or if you are considering it in the future. You can email me anonymously at bhan@housingwire.com.
Until Next Week,
Brooklee Han
Real Estate and Title Industry Reporter
bhan@housingwire.com
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