New Type Of Fraud To Be Alert For

By
Real Estate Technology with Home Value Leads

I received this from one of my title companies. There is a new type of fraud to be alert for. Please read this and share it with others to be alert. This fraud could have possibly cost the title company in the area of $100 grand. Kind of long read, but well worth it. 

During the holidays, I received a call from an agent who asked me to listen to her story and try and get a feel for what was going on with a particular transaction. Apparently, an agent had called her and told her she was working with a client who wanted to write a contract on her million dollar listing. She said the client was very qualified, had lots of money, and this had been his dream house. Nothing alerted me to any issues until she proceeded to tell me the client fell in love with the house when he serviced it a while back during his employment with a pest control company. She went on to say the client had made a significant investment overseas, the investment had paid off very well, and the cash was just rolling in. Red flags started coming to mind! Red flags really started flying when it was mentioned there was a slight problem in that the client’s investments are doing so well that Congress is now involved. Knowing this was, to say the least, atypical, I cautioned the agent about going further with this “potential” buyer.

Don’t Be A Victim of Fraud!

She said, “Well, the Buyer’s agent has said that they can close in two weeks, so if I write a contract for a short closing and it doesn’t play out, all I’ve done is held the property off the market for two weeks.” I suggested other possible findings to her story. The Buyer is going to write a significant earnest money check to show they are serious buyers, deposit the check with the title company, then terminate during the option. At that point, the buyer will send wire instructions for the title company to wire the money back. Wire gets sent and a few days later, the buyer’s earnest money check is returned to the title company unpaid. Alternatively, because of this recurring scam, it is common practice for the title company to delay refunding earnest money until the check has cleared, so buyer doesn’t terminate, but when their earnest money check is returned the buyer blames the bank and assures the title company that the check will be made good. After several calls and excuses, the buyer starts blaming the title company, the agents, and the seller for harassment, slander and liable. The property remains encumbered by a contract hindering the further marketing of the property by the seller, even though the buyer has already breached the contract.

I also explained to the listing agent that title companies are being presented with an increased number of counterfeit cashier’s checks, so with such a short closing for this transaction and in view of some of the questionable information being received, I told the agent that if we were the title company on this particular transaction, I would require wire transfers for both the earnest money and funds to close. It was at that point the listing agent said, “That is interesting, when they said they were going to write the contract they wanted to close by cashier’s check.” I then suggested to the agent, if the seller still wants to entertain a contract from this particular buyer, make it a requirement that all funds due from the buyer be deposited by wire transfer. For a transaction that size, if it were legitimate, the buyer should not have a problem with the request. After the agent made the wire transfer a requirement, she never received a contract from that buyer.

Pay attention to the red flags. If you feel it sounds too good to be true, it probably is and you shouldn’t get involved. It is not worth it to tie up the property even for a short period of time. If you do and the contract falls through you could get embroiled in issues with both the client and the property.

Posted by

Brian Rayl

Licensed Dallas Real Estate Agent 

Co-Founder of Home Value Leads

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Praful Thakkar 01/27/2013 12:22 PM
  2. Gabe Sanders 01/27/2013 07:19 PM
  3. Pat & Wayne Harriman 01/27/2013 11:23 PM
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Rainer
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Dan Hopper
Keller Williams Realty Downtown LLC - Denver, CO
Denver Realtor / Author / Advocate/Short Sale

Brian, you are correct about the Title companies NOT taking such funds by certified checks and so on.  THEY are requiring those type of funds to be wired.  Especially, on "cash" transactions.  Even the earnest money, if they are going to hold it.  Since our brokerage firm still holds the EM checks in our trush account... we KNOW when a check bounces, and we will immediately terminate the contract, due to this action.  NO good funds for EM... NO CONTRACT!

Jan 19, 2013 12:17 AM #1
Rainer
126,298
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Dan, the problem is if the cashiers check that they used is fraudulent, it can take weeks for a cashiers check to come back as unpaid. The whole time, you and your bank take for granted that it is good. Most banks take cashiers checks as certified funds and make the money available to you and your account immediately. It appears as if the check is good. 

By the time it comes back as unpaid, the "buyer" may have already terminated and demanded their money back. You may have already given them a cashiers check or wire for their money. Now you are out because you can't reverse a cashiers check or wire. 

 

Jan 19, 2013 07:24 AM #2
Ambassador
1,611,229
Florida Tolbert Team Keller Williams Advantage
Keller Williams Advantage III Realty in Lake Nona - Orlando, FL
Keller Williams Land Division Specialist

Let me give you this one...

Person steals my yard sign and places in the front yard of a vacant home they have burgled, changed the locks and are now running craigslist ads for cash only move in with no lease or last and security. 

The real estate sign apparently gives it legitimacy.  Port St Lucie police have them trying it at least twice this month. 

I caught and met them once but they got away. 

Jan 19, 2013 10:30 AM #3
Rainer
126,298
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Wow, it is amazing the lengths these cheats and theifs will go to to make a buck. Imagine if they just used that ingenuity and drive to do something legit.

Jan 19, 2013 11:54 PM #4
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3,685,897
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Brian, I'm always amazed at what scammers will do to try to earn a dishonet dollar.  If they put that much energy into earning a living honestly, they would probably do a whole lot better.

Jan 22, 2013 07:03 AM #5
Rainer
126,298
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Agreed Patricia!

Jan 22, 2013 09:19 AM #6
Rainmaker
1,130,079
Paula McDonald ~ GRI
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279
I had two of these presented on my listings just this past year. What a headache.
Jan 27, 2013 01:20 AM #7
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

This sounds very similar to the one of a cash buyer writing a large EMD check for a property then wanting to cancel the contract and get the EMD refunded.  Unfortunately, some borkerages end up refunding money when a check hasn't cleared.  

Jan 27, 2013 01:54 AM #8
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3,685,897
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Hey Brian, I included this post in Last Week's Favorites.  Enyoy the rest of your weekend.

Jan 27, 2013 02:26 AM #9
Rainmaker
1,584,948
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Good illustration of how these scams work, Brian.  I had a potential renter want to do the same thing a few years ago.  I gave his cashiers check to the authorities and that was the last I heard from anybody.  Be wise out there.

Jan 27, 2013 03:22 AM #10
Rainer
145,320
Jeanne Kozak
RE/MAX In Action - Martinsburg, WV
REALTOR and Broker/Owner in WV and VA

I have had several things happen just like this. Once I have started to really question the transfer of money, and tell them they have to contact a local settlement attorney, that is the end of it. Does anyone really fall for this anymore?

Jan 27, 2013 11:08 AM #11
Rainer
355,890
Nina Rogoff
RE/MAX Executive Realty - Medfield, MA
Sells Real Estate!

Wow! I would never have thought that a cashier's check could be fraudulent, but I guess you're pointing out that anything can be scammed by those who act that way!

Jan 27, 2013 11:29 AM #12
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Brian, too good to be true! Thanks for bringing it to everyone's notice (will re-blog it, too!).

Too many red flags - and I liked the wiring money solution.

Jan 27, 2013 12:21 PM #13
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William Johnson
Retired - La Jolla, CA
Retired Real Estate Professional
Hi Brian, I wrote a comment and it simply wouldn't go through. I refreshed the page and it disappeared. This was a very interesting posts and an excellent read. My question was, would the issuing bank confirm the validity of the certified check? Perhaps it ehy would, any check of this nature should have a call made to confirm it's authenticity
Jan 27, 2013 12:30 PM #14
Rainmaker
658,270
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

I didn't think a cashier's check could be fraudulent either. I guess you learn something new every day! Thanks for bringing this to the forefront, and I'll reblog it as well!

Jan 27, 2013 11:21 PM #15
Rainer
126,298
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Paula: Way to be on the lookout. Good catch. 

Chris Ann: Very true. It just seems more legit because it is a cashiers check, and everyone (including me before I read this) assume that the cashiers check is automatically good. 

Patricia: Wow! Thank you so much! Lots of new traffic since you posted yours. 

Mike: Strong work!

Jeanne: Luckily, all of our transactions go through a title company and they are responsible for all of the funds. And yes, they do fall for it. A cashiers check is assumed to be certified funds. 

Nina: I didn't either until I saw this. 

Praful: Thanks!

William: Good question, I'm not sure. But what about a cashiers check that is purchased at a gas station or a checks cashed place? I'm not sure on them if it is really that obvious who the issuing party is. Cashiers Checks are not always gotten at a bank.

Pat: Yup, me too! Thanks for the reblog.

 

Jan 28, 2013 12:46 AM #16
Rainmaker
1,506,561
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

Interesting!  It sounds as if requiring a wire transfer is the way to weed out the phony versus real buyer.  Something else to be on the lookout for!

Jan 28, 2013 02:55 AM #17
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Brian -- as the lender, we are usually requesting copy of the bank statement showing the clearing of the Earnest money payment (doesn't matter how they pay, we want documentation that it came out of their account.)

Jan 28, 2013 04:14 AM #18
Rainer
126,298
Brian Rayl
Home Value Leads - Highland Park, TX
Active Agent and Co-founder Of Home Value Leads

Kat: That's what it sounds like alright!

Steven: They don't care about the lender! They never intend to make it that far. They will cancel and have the title company or broker refund their earnest money deposit. They will get it, but then their cashiers check will come back as counterfeit. The title company or broker is then out that money. They don't want to close, they just want to steal the amount of the earnest money. 

Jan 28, 2013 05:20 AM #19
Rainer
39,746
Tonia Rahming
RMS Realty, St Lucie, Martin and Palm Beach Counties - Saint Lucie West, FL
Relocation Specialist

I had a buyer that pretended to be someone else and try to pass a bad check from a company for escrow.  Something just felt wrong and I did some extra research and found out it wasn't the first time this person tried to pass a bad company check. I notified title and the authorities immediately.

Mar 18, 2013 06:57 AM #20
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