How Companies in Real Estate Use Modern Treasury

Real estate is a massive industry in which continued growth and success hinge on modern money movement. To give a sense of this vertical’s scale, the 2023 residential real estate market in the US is estimated at $2.53B. Commercial real estate resulted in direct expenditures of $826.9B in 2022, contributing $2.3 trillion to US GDP.

The ability to move money quickly, efficiently, and securely has huge implications for real estate companies. Payment systems affect customer satisfaction, cash visibility, and the efficiency of operations, not to mention susceptibility to fraud. Nevertheless, many financial processes across the industry are still manual. Most real estate companies still rely on checks and the industry has been slow to adopt faster payments technology such as RTP. Modern Treasury’s origin story was, in large part, inspired by the massive need for payments innovation in this vertical.

In this article, we’ll discuss why companies in real estate need modern, scalable payments infrastructure and how eight primary use cases stand to benefit.

Why Real Estate Payments Are So Complex

Real estate is a broad and complicated industry. Many companies in real estate manage relatively infrequent transactions with high-dollar value, typically via bank rails. A large portion of these payments are customer-facing and for many end-users, real estate payments are some of the most important transactions they’ll make in a lifetime.

Because of this, we see the following payments challenges across the industry:

• Payment processes tend to be manual and opaque. Many real estate teams lack automation, proper controls, and insight when it comes to payments. Not to mention issues around speed and efficiency. Given that visibility is a key lever for user satisfaction in any real estate transaction, real-time insight onto payment statuses can mean the difference between a satisfied and an unhappy customer. Not to mention the value of deep insights on the back-end.
• Bank integrations can be difficult to build and maintain. Most real estate payments happen via bank rails. For smaller companies that might mean using a third-party payments provider or sending money directly from a bank portal. But the larger a company gets, the more they have to rely on homegrown bank integrations to move money programmatically. Some of the largest real estate businesses operate this way.
• Data collection and recon are labor-intensive. It’s not uncommon for real estate teams to manage payments data in a variety of systems, lacking a central source of real-time truth across bank accounts and financial tools. And with manual reconciliation, the monthly close process is often grueling and auditability suffers.
• Fraud prevention has historically dictated how money moves. According to the Federal Bureau of Investigation, $350M was lost in real estate wire fraud across 11,578 victims in 2021. The threat of fraud is ever present and explains why the industry evolved around specific payment methods with extensive (literal) paper trails. As such, compliance and security are always top of mind.

Modern Treasury can help real estate companies get to payment systems that work—meaning systems that are accurate, safe, reliable, efficient, and (ideally) automated. This post explains how.

Modernizing Money Movement Across Real Estate Use Cases

Real estate is broad—this article will focus on eight use cases, with examples throughout:

• Property managers who intermediate rent payments between tenants and landlords
• Mortgage providers that provide capital for people to buy homes
• Title & escrow companies that help mediate the real estate closing process
• Brokerages that connect buyers to sellers (and take a cut from transactions)
• Rental marketplaces that connect prospective tenants and landlords
• Investing marketplaces that help investors find and invest in real estate
• Developers that focus on building real estate property
• Real estate SaaS offering software to serve the real estate industry

1. Property Managers

Because property managers deal with rent payments, seamless payments are paramount to improve end-user experience (tenant and owner) and enable business growth.

Let’s say Terrific Tenant, a property management company, handles operations and upkeep for vacation rentals—they also manage communication with tenants.

To uplevel their payment operations, Terrific Tenant needs to:

• Automate the collection of rent and service payments, as well as payouts to owners and bill payments via ACH or wires. It’s reasonable to assume the average transaction size of these payments may be thousands of dollars, making them prohibitive to cards. This payment experience should also be flexible to ensure timely remittance from tenants, and help remote property owners pay property managers for their services.
• Reconcile each payment as it comes in. Given the number of properties they manage, Terrific Tenant needs a robust reconciliation process to ensure they know which properties they’ve collected payments for and when.
• Hold security deposit balances. Terrific Tenant needs a place to store security deposits and accurately earmark them for the correct tenants.

How Modern Treasury Helps

Using Modern Treasury to automate these tasks  gives Terrific Tenant the ability to better manage payments and ultimately improve user experience.

Modern Treasury’s payments API can facilitate  rent collection and payouts. The ledgers API allows Terrific Tenants to track balances for renters and owners programmatically. And with automatic reconciliation, Terrific Tenant can reconcile every incoming and outgoing transfer.

2. Mortgage Companies

Mortgage companies intermediate some of the most important sources of consumer debt. Improved payment operations can reduce overhead, unlock efficiency, and promote scalability with a better experience for borrowers, servicers, and originators.

Take Amazing Mortgages, a mortgage provider intermediating funds between lenders (usually FIs) and borrowers. When a new loan is underwritten, Amazing Mortgages needs to:

• Disburse mortgage funds via wire, ACH credit, or RTP. The speed, visibility, and security of these high-dollar value (and emotionally significant) loans is critical for Amazing Mortgages to satisfy customers and operate effectively, not to mention scale.
• Collect payments using ACH debit and reconcile them automatically. Amazing Mortgages should aim to make the payments experience as convenient as possible—both for end-users repaying loans and their back office responsible for matching incoming funds to loan accounts.
• Pay off lenders via wire, check, or RTP. Again, high-dollar transactions like the payouts Amazing Mortgages issues to satisfy lenders need to be timely and traceable for all parties involved. In many cases, errors and delays could endanger banking relationships.

How Modern Treasury Helps

With flexible APIs, Modern Treasury provides the programmatic building blocks for digital mortgage companies to lend at scale. Whether a mortgage provider is the originator or servicer of a loan, Modern Treasury can help simplify payment operations to accelerate growth.

3. Title and Escrow Companies

For title and escrow companies, faster and more convenient payments can shorten closing times.

Let’s say Tip Top Title & Escrow, offering services to both residential and commercial clients, has just started a new closing process. They need to:

• Onboard external stakeholders, collecting and sharing account information. The onus is on Tip Top to make this process convenient and fast for both buyers and lenders to keep the close process moving swiftly.
• Reconcile incoming transactions from buyers and mortgage providers. Tip Top is responsible for securely managing high-dollar values held in escrow and ensuring money is accurately linked to the proper account. Mistakes at this point could cause major holdups.
• Disperse funds to sellers and mortgage providers via ACH, check, wire, or RTP. The successful exchange of funds that closes out the real estate purchase process is serious business. Indeed, the conclusion of this process hinges on the timeliness and efficiency of these high-dollar transactions.

How Modern Treasury Helps

Title and escrow companies can use Modern Treasury to make payment statuses visible to buyers and sellers throughout the close process. They can also manage external parties more easily, as well as track and reconcile fund flows automatically.

With seamless counterparty onboarding, faster payments, robust payment approval roles, and full visibility into real-time payment statuses, Modern Treasury can shorten sales cycles and increase satisfaction for buyers, sellers, and mortgage providers.

4. Real Estate Brokerages

In the case of real estate brokerages, an increase to the speed and visibility of payments can be a powerful business accelerator. This is because many brokerages intermediate the closing process and take cuts out of home purchases. Speeding up disbursement of commissions can also greatly improve agent experience.

Consider Best Brokers, a virtual real estate brokerage overseeing hundreds of agents. After a closing process completes and escrow disburses commissions, this company needs to:

• Automatically reconcile incoming commissions to the right agent and house sale. Relying on manual and/or multiple tools and processes to match these transactions can consume valuable time and lead to costly errors for Best Brokers.
• Pay out agents involved in the transaction via wire, check, or RTP. Getting agents paid quickly and securely, via the right payment method for each scenario, is at the heart of Best Brokers ability to thrive.
• Hold balances incentive programs. Best Brokers offers agents a choice of performance incentives and needs to hold funds for gift cards, charitable donations, and/or cash bonuses to be delivered after certain milestones.

How Modern Treasury Helps

Modern Treasury users can accurately match transactions with agents so there’s never confusion. Agents get paid easily and finance teams can utilize robust rules to control transfers and manage liquidity.

Since Modern Treasury integrates directly with bank partners, brokerages gain increased visibility into payment operations. These teams can also reconcile commissions automatically, pay out agents faster, and hold balances for agents, even introducing loyalty programs.

5. Rental Marketplaces

For real estate rental marketplaces, end-user convenience and delight are vital, coupled with the ability to expand seamlessly. Given that rent payments are central to customer experience, streamlined payment operations can be a differentiator.

Let’s say a new tenant just signed up for Lush Lofts, a rental marketplace focused on central and upscale dwellings in six major cities, needs to:

• Onboard the tenant or guest renter. Convenience is key for these transactions—Lush Lofts gives tenants the ability to pay with their preferred method, quickly and securely, with custom-branded forms.
• Collect payments and automate reconciliation. As payments are received, Lush Lofts needs to ensure they are accurately accounted for and linked to the correct property wonder account. Because Lush Lofts rents hundreds of properties each week, an automated process is vital.
• Hold security balances and other fees. Lush Lofts needs to ensure properties are kept in pristine condition by holding security deposits and collecting cleaning fees. The ability to authorize and, as needed, collect or return these funds swiftly is key for parties on both sides of the marketplace.
• Pay property owners automatically. Property owner experience is just as important as tenant experience for a rental marketplace. With the quantity of payouts Lush Lofts issues daily, these transactions need to be fast, reliable, and programmatic.

How Modern Treasury Helps

Modern Treasury offers rental marketplaces like Kopa the ability to seamlessly collect rental payments and disburse funds to property owners via ACH, wire, and RTP—regardless of whether these marketplaces offer home and apartment rentals, vacation rentals, or short-term office space and corporate rentals.

Read the full case study here.

Payment automations in tandem with controls and audit tools for finance teams allow marketplaces to leverage Modern Treasury’s API and scale programmatically.

6. Investing Marketplaces

Investing marketplaces facilitate transactions between real estate investors and recipients. These can be property developers or individual owners. To succeed, real estate investing marketplaces need to process payments quickly and transparently, with auditable, airtight record-keeping.

Suppose a new user signs up for Home Wealth, a marketplace that allows users to invest in a portfolio of residential complexes across states.

• Allow users to fund their account in-app via wire, check, and ACH. Home Wealth users want to be able to start investing quickly and easily, in order to see returns as soon as possible. Since Home Wealth offers tiered benefits for higher dollar investments, initial investments values can be substantial, making visibility and security essential.
• Maintain and share user balances. It’s vital for Home Wealth users to have real-time access to updated balance information, in order to monitor their investment and make timely decisions.
• Make investments on behalf of users via wire, check, or RTP. Because Home Wealth invests in multiple properties across states, all of which operate uniquely, the ability to invest via multiple rails seamlessly makes a big difference.
• Allow users to redeem investment balances, with fast payouts via wire and RTP. When users are ready to pull money out of their accounts, a slow or complicated process can severely damage customer experience and thus, brand reputation. Home Wealth needs to make this process quick and simple.

How Modern Treasury Helps

Because Modern Treasury integrates directly with bank partners, investing marketplaces can easily automate and manage payment operations. Investors can contribute seamlessly—they also know where they stand with visibility into balances.

Marketplace finance teams can also eliminate the monthly-close process, via automatic reconciliation and real-time data.

7. Real Estate Developers

For real estate developers, successful project management hinges on the convenience and visibility of payments. This is because developers are often managing millions of dollars and dozens of vendors for any given project.

Imagine that Remarkable Real Estate, a developer focused on renovating warehouses for office space, is developing a large new project. From the start of this project, the team will need to:

• Onboard vendors and suppliers, with customizable emails and a UI to collect payment details. The success of every project Remarkable Real Estate undertakes relies on good relationships, facilitated by convenient payment processes that respect everyone’s time.
• Send and receive payments directly from Remarkable Real Estate’s bank account. Given the volume of payments the team is responsible for, managing fund flows through the company’s bank is less expensive and more efficient. But building integrations in house didn’t ultimately make sense.

How Modern Treasury Helps

Given all the moving parts involved in developing a new project, payments shouldn’t add complexity. Modern Treasury can ensure developers have full visibility into their payments, with automations, integrations with software like Quickbooks, and the ability to create approval rules for different team members across the business.

8. Real Estate SaaS

Finally, for real estate vertical SaaS, embedded payments—and sitting in the flow of funds —are key to scalability. Embedded payment services make products stickier and open up new revenue possibilities via float.

Modern Treasury enables SaaS companies of all kinds in the real estate vertical to quickly connect to bank partners and manage payment operations that are automated, transparent, resilient, and compliant.

How Modern Treasury Helps

How real estate SaaS companies use Modern Treasury will depend on their product offerings (and many potential fund flows have been covered above).

If we consider Home Hub, software for flexible mortgage loans and pay-back, here are few additional examples of tasks a team might need to accomplish:

• Embed support for non-card payments directly into the Home Hub app. Embedded payments offer a host of benefits, including a much improved user experience.
• Automatically reconcile incoming payments from loan holders. Manual reconciliation takes time and invites errors Home Hub, as a growing platform, just can’t risk.
• Create loyalty features, credit, or reward systems for timely payments. Incentives are a key part of Home Hub’s offering but managing balances across tools and processes doesn’t make sense—they need a central source of truth.

Procore offers another great example of how payment operations can simplify and level up processes like the payment of subcontractors during construction.

Click here to watch the full conversation.

Real Estate at Scale with Modern Treasury

Real estate companies across use cases are responsible for efficient, fast, and secure money movement—very often dealing with high-dollar value transactions that hold emotional significance for customers. The ability to improve end-user satisfaction, as well as  automate and centralize payment processes, is paramount for real estate companies, especially those looking to scale operations in the near future. Modern Treasury can help—learn more about solutions for real estate and please reach out at any time.