Putting that first bit of money toward buying a home — the earnest money deposit — can be nerve-wracking, especially for new buyers. Will everything work out and the deal close as they hope?
Seattle-based escrow startup Modus thinks it has a way to make that part of the home transaction less antsy. It’s launched a new Venmo-like earnest money tool as a website that it says eliminates the need for wire transfers and reduces the likelihood of buyers getting scammed during a real estate transaction.
Modus calls the tool, available on both desktop and mobile browsers but not as an app, Digital Earnest Money Deposit.
In a statement, the company said that it lets users “securely submit funds to escrow, bringing convenience and peace of mind to real estate agents and their clients during home closing.” The company also believes that by cutting out wire transfers, it creates a more secure process that is less susceptible to fraud.
“This is an industry first,” CEO and co-founder Alex Day said in a statement. “The Digital Earnest Money Deposit capability enables buyers to easily and securely deposit their earnest money through proprietary technology built within the Modus platform.”
Modus makes money by charging an escrow fee for each transaction it handles. The company did not say specifically what that fee was, but a company spokesperson described it as comparable to what other title and and escrow companies charge.
Modus was founded in January 2018. The company touts its tech-forward approach to title and escrow services, and has focused on increasing both the speed and security of real estate closings. The company’s platform is available for use by buyers, sellers and their agents.
Launching Digital Earnest Money Deposit is part of that mission, and in Modus’ statement the company described the new tool as “similar to Venmo.”
Owned by Paypal, Venmo is a mobile app best known for letting people quickly transfer money to each other. For example, the app has become a popular way for people to split bills at restaurants and bars; one person simply picks up the check, while the others send that person money via their smartphones. Venmo can be linked to either a bank account or a credit card.
Modus hopes to bring that same ease of use to the process of paying earnest money. In an email, Modus co-founder and chief operating officer Jai Sim told Inman that users can connect Digital Earnest Money Deposit to their bank accounts, though it is not compatible with a credit card.
In his email, Sim went on to say that Modus’ new system also “infinitely” improves security because “other companies email wire instructions that the buyer must download from their email and then take with them to their bank to initiate a wire.” That process opens buyers up to getting scammed, particularly via fraudulent emails, and once they send money to the wrong place their funds are often permanently lost.
“This is the nature of wire fraud which is so rampant in the industry,” Sim said.
Recent high profile victims of this kind of fraud include a pastor and his wife, who lost $130,000, and a father, who lost $122,850. In the latter case, a title company hired the father as a consultant for the amount he lost so that he and his family could ultimately purchase their home.
A report last fall also revealed that real estate companies themselves are growing targets for scammers because they conduct high-value transactions over the internet.
Sim said that the new Digital Earnest Money Deposit tool should cut down on these problems.
“With the Modus system,” he wrote, “this is eliminated because you are connecting your own bank account through a secured platform.”