Online Banking Considerations
Recently, I helped a buyer successfully negotiate an offer to purchase a home. It was a smooth process – a beautiful property, fair price, reasonable conditions, and a seller that was motivated. All in all, an ideal scenario.
After hearing the news that our offer was accepted, I sat down with my client to talk about next steps, including handling the deposit that was now due within 24 hours. Having already confirmed that she had the funds available for a deposit, this was just a formality – until it wasn’t.
“Who do you bank with?” I asked. “Oh it’s all online – everything is done by phone or a desktop app.” Oops… I knew right away that I had missed a step. Because, what I have learned in recent years – as online-only banks have become increasingly popular – is that having money isn’t the same as being able to move it quickly or easily.
Planning is Required
I have nothing against online banks. Often, their fees are lower and the online tools are versatile and easy to use. They have some real advantages over brick-and-mortar alternatives.
What they don’t have, I’ve learned, is the agility to accommodate quick-turnarounds. There can be quite a gap between how well an online bank works for everyday life and how well it works for the first 72 hours of a real estate transaction. It’s important to be aware of that gap before you’re standing in it.
Timeline for Deposits
In Ontario, a standard Agreement of Purchase and Sale requires the deposit – typically via bank draft or wire-transfer – within 24-hours of acceptance. That’s been the industry standard for a long time. It’s a way to quickly show a seller that your offer has real weight behind it.
Most banks can turn around a draft on the same day – although, increasingly, appointments are being required for that, vs. just strolling up to a teller and asking for the draft. With online banks, there is no appointment or teller to deal with – and funds often need to move from your online bank to a brick-and-mortar institution where you can access a draft. That transfer alone, from my experience, typically takes at least 24 hours.
Plenty of Workarounds
In our case, I’d forgotten to confirm that my buyer used a regular bank – and she had no idea that she couldn’t just access her money upon demand. I reached out to the seller’s agent who was fortunately very accommodating; in fact, he knew what was coming the minute the words “online bank” came out of my mouth. We were granted an extension and everything proceeded smoothly. But – lesson learned.
If you’re an online banking customer and you’re shopping for a home, bear all of this in mind and plan for it. Now, it’s part of my routine process with buyers as we start to work together. We get clarity on the bank’s turnaround timeline and we adjust accordingly. Sometimes, the buyer pulls some portion of their deposit out and sets it aside in a brick-and-mortar bank for easy access – and then does a secondary deposit from their online bank. Other times, we request a longer period during which to get the deposit to the listing brokerage. There are lots of options to deal with this, as long as you plan ahead.
When a buyer tells me that they do all of their banking on their phone, I don’t hear a problem .I hear a key detail to build the offer around to ensure that the timeline on paper ends up matching the timeline in real life.
