Suppose you are buying a vehicle or other item that costs more than $10,000 from a private seller. Whatever you are purchasing is completely legal to own and transfer.
Furthermore, you want your payment method to meet the following requirements :
It needs to be immediate. Both the buyer and the seller need to feel the chance the transaction is legitimate to be 100%, so you can finish the deal right away. If you pay by check, for instance, the seller has to wait days for it to clear. If cash, the cash might be counterfeit.
It needs to be resistant to theft. Whatever method used needs to make it difficult for a dishonest third party to rob the seller right after they are paid. Cash, gold bars, etc as payment are all vulnerable to theft.
It needs to inherently record the transaction in a secure way. If the seller reneges and doesn’t give you the note to the vehicle or otherwise cheats you, you need to be able to prove with absolute certainty that you did pay the money. A case purchase with a receipt does not have this security, a simple hand signed receipt is trivial to forge. Buying with bitcoins also doesn’t have this security.
It needs to be practical for ordinary people to use.
So far, the only method I can think of is the following : after agreeing to the sale, the buyer and the seller drive to the local branch of a bank the buyer has an account at. The buyer orders a cashier’s check drawn on the bank itself to be drafted, with the name of the seller on top. The clerk hands the check directly to the seller.
I’m not sure if you have to actually order the amount of money for the check to be withdrawn as cash from your account and then to have the cash immediately used to fund the check drawn on the bank itself, but I suspect there’s no need for this.
Doing it this way, the seller knows that the bank itself is honoring the check and not the account of the individual account holder who ordered it. It doesn’t take time to complete like a wire transfer.
If a thief robs the seller in between the time he receives the check and when he deposits it at his own bank, it’s possible to audit this transaction and show it was never completed, and there’s presumably a way to get the check reissued. The thief does not get the money because the thief’s name does not match the name on the check.
The buyer receives a receipt from the bank itself recording this transaction, and the bank can verify it happened through their own records.
Does this method work, or am I misunderstanding details about how this actually works? Is this faster than a wire transfer, or do instant wire transfers exist between banks?
A cashier’s check is what I would think of. These checks are drawn on the bank’s funds and not the individual’s. Having it created while both parties are present eliminates the risk that the check might be some kind of forgery.
Just to address this (admittedly minor) part of the question: Yes, instant wire transfers between banks exist. The Fed in the U.S. operates a system called Fedwire, the ECB in Europea a system called Target2. They are real-time gross-settlement systems, real-time meaning that the transfer from bank to bank can be settled and finalised the moment it is entered into the system, and gross meaning that the transferred amount goes from one bank’s account with the central bank to the other bank’s account, rather than being netted against another transaction that takes the opposite direction, with only the net balance being transferred.
You can eliminate the requirement that the transaction be immediate by using an escrow agent, who both guarantees that the payment is made and that the purchase receives the object–and will meet your other requirements. I believe an escrow agent is often used in purchasing a house, for example.
I used to sell a lot of used cars as a private party. I always went to the buyer’s bank with them and watched as they obtained the appropriate pile of cash greenbacks.
Then I’d sign over the car title inside the bank lobby when he handed me the cash. He could then leave with the car.
Then I’d take the cash to the teller, and either deposit it if this happened to be my brand of bank, or else obtain a cashier’s check made out to me which I then took to my own bank and deposited it there. Buying the cashiers check with cash worked best if I could go back to the same teller we’d already dealt with. There’d be less suspicion the cash could be counterfeit. And yes, I filled out a lot of CTRs for transactions over $10K.
The reason to have cash in the middle is that banks can and do stop payments on cashiers checks. At least in the US they absolutely are **not **guaranteed safe funds. If instead I’d had him buy a cashiers check and taken that to my bank, there’s a window of a couple days where if his bank discovered he hoodwinked them when he bought the CC, they will reverse the payment and it’ll come out of my account.
With greenbacks in the middle that acts as an impenetrable firewall to prevent any shenanigans at the buyer’s end from impacting me the seller.
The only other safe way, as **PastTense **says, is to hire (and pay for) an escrow agent.
I suspected as much. Thanks for letting me know what the correct way to do this type of transaction is. The only slight variance I can think of on this scheme is to basically have the pile of cash not even moved. That is, do this transaction right in front of the teller, with the teller keep his/her eye on the pile of cash. That way the teller knows it hasn’t been tampered with when you deposit it/purchase a cashier’s check, and the teller doesn’t actually even have to count it (since it’s going right back into the same drawer/safe it came out of, none of it can be missing. It won’t matter if the teller miscounted)
The only thing the teller needs to verify is that the withdraw from the buyer’s account is the exact same amount as the amount of money you are depositing in your account/using to buy a cashier’s check.
Amusingly, this transaction I described would work perfectly if the teller took a piece of paper, wrote “cash value $10,000” on it, and for the purpose of this transaction all parties (buyer/seller/teller) agree that the piece of paper is $10,000 in greenbacks.
Following the advice already given, visit the bank several days in advance and speak with the bank manager. They need to have sufficient cash on hand for the transaction and the manager can offer additional advice about the upcoming transaction.
Say the car costs $10k and the bank has only $1000 on hand.
Buyer goes to the bank teller, withdraws $1000. Buyer hands the $1000 to the seller. Seller hands the $1000 to the bank teller and asks to deposit $1000 into the seller’s account or buy a cashier’s check.
The bank now has $1000 back in the cash drawer. So Buyer withdraws $1000 again.
More realistically a bank probably has enough cash to do any reasonable purchase in 2-3 transactions this way tops. Bank manager could be standing there to help and act as an escrow agent (before starting this transaction series, hand the signed deed to him)
It’s hard for the seller to pre-arrange things with the bank because the process must be done at the buyer’s bank. And the seller may have no account there.
And oddly enough, the buyers of used cars are never as organized and businesslike as the folks who sell them as a side business. I’ve taken some interesting rides with folks who were sure they knew which bank they used. Until they needed to actually go there.
Your first problem as a buyer is to be sure that the seller actually owns the item and has authority to sell it. The second is to be sure that it is the item you saw described, and in the condition you expect. Exchanging the cash and title is the final link and doing it in the bank seems to me to offer the best solution. I would try to make the exchange in full view of the security cameras.
There have been many scams where checks are not honoured, even after being credited to your account; where the goods (trailer caravans were popular here for this) did not belong to the seller and he did not live in the house where it was parked.