Counterfeit Checks in Real Estate Transactions

We’re lucky enough to be living in an age where today’s ever-advancing technology makes it easier to perform a number of tasks with ease, all from our own home. Unfortunately, it also makes it easy for cyber criminals and other scammers to develop sophisticated methods for acquiring money and sensitive data from individuals and business owners.

If it seems as though the media is always alerting you to be on the lookout for one type of scam or another, there’s a good reason for it — scams of all types are on the rise. Some are seasonal, such as IRS scams at tax time. Others occur all-year-round, such as scams targeting individuals involved in real estate transactions.

In fact, the FBI has noted that in recent years real estate scams have risen exponentially. There are several types of real estate transaction scams, but one that is gaining in rampancy is the use of counterfeit checks. Checks were once commonplace when conducting real estate transactions, but over the years real estate professionals have come to prefer electronic money transfers.

Wire transfers also come with their own risks and opportunities for fraud, but so long as real estate professionals, as well as buyers and sellers, remain careful and vigilant in ensuring all information is reliable and comes from a trusted source, wire transfers can be very safe.

Also serving to minimize the risk of fraud during real estate transactions is the use of a secure money transfer platform, such as paymints.io. Money is sent electronically in an encrypted format, is easily tracked, and eliminates the need to share personal banking info.

Real estate professionals are quickly beginning to see the advantage and benefit in using a money transfer platform, since scams involving counterfeit checks are almost always specifically designed to target real estate agents and title agencies.

How Does the Counterfeit Checks Scam Work?

A counterfeit check scam begins when a person contacts a real estate agent and expresses interest in a property. The individual usually claims to be out of state or even in another country, but shows ample means and a willingness to pay cash for a property. As the deal progresses, a local attorney is retained to handle the closing.

This all seems like a legitimate real estate transaction, but unbeknownst to the real estate agent and the title agency, the funds that the individual had provided throughout the transaction were from fraudulent business accounts — or rather, appearing as legitimate accounts but actually obtained through fraudulent means. It’s a form of identity theft to make it appear as though the buyer is genuine.

The checks are deposited, but some of the funds are wired back to the buyer’s account for one reason or another. Usually the reason is that the buyer has other interests that also require some funds, and since the closing is not occurring yet, the buyer would like some of the funds back from escrow until such time as they are definitely needed.

This usually occurs before the checks clear. Detailed instructions are given for the funds to be wired to a desired count. The money is often in the hundreds of thousands. Then, the checks bounce, but the buyer has already received a large sum of money, costing the real estate or escrow company a large loss.

While such a transaction often has many red flags, real estate professionals continue to fall victim to such scams because of the sophistication of the scammer and the details involved in the messages throughout the course of the deal. A perfect example of what initially appeared to be a legitimate deal but soon sparked scrutiny is one that occurred recently with Ticor Title in Oregon, and a buyer who claimed to be out of the country due to the pandemic.

How to Spot a Counterfeit Check Scam

There are, of course, plenty of legitimate real estate transactions that occur with international buyers or buyers who are otherwise unable to meet the real estate agent in person. But any such transaction should always be met with scrutiny from the beginning, since this is the primary means to initiate a counterfeit check scam.

Checks drawn from foreign accounts also usually take longer to clear, which is why they are a favorite of scammers. Waiting for the check to clear allows the scammer more time to try to acquire funds from the trust account, before anyone can determine that the check is actually not valid.

Real estate lawyers must take care to ensure that all funds from a check have cleared before they wire any funds from the trust account to other accounts on behalf of the buyer. Of course, any request by the buyer to have funds removed from the trust account should also be met with scrutiny.

There are also difficulties involved with the banks, which by law are required to allow depositors access to the funds, even when the checks might not have cleared yet. Scammers are well aware of all the laws, loopholes, and strategies they can employ to trick real estate attorneys and title agencies.

Bold scammers may even appear in person with real looking credentials, and eventually present a counterfeit cashiers check. Such transactions usually occur directly between a buyer and a seller, but could also target attorneys and title agencies as well. As with the above scams, disbursements are made for one reason or another, and then the checks are eventually proven to be fraudulent, but the scammer has now disappeared along with the funds.

Counterfeit checks have also been utilized for both good faith deposits and closing funds. The details always vary slightly, but the ultimate goal of the scammer is to acquire a disbursement of funds before the checks are discovered to be fake.

Protect Yourself With a Money Transfer Platform

Using a money transfer platform eliminates many of the risks of falling victim to a counterfeit fraud scam, as well as many other fraudulent actions undertaken by cyber criminals and hackers. Many real estate professionals already favor paymints.io in lieu of checks and other wire transfer options not just for the safety factor, but also because it saves time, money, and is compliant with banks.

Paymints.io is an intuitive money transfer platform that takes the outdated wire transfer model to the next level and makes it easy and convenient for buyers to send funds for earnest money, real estate transaction fees, and closing costs. Real estate professionals can request money for fees in an instant and the buyer can send them instantly as well, serving to eliminate the need to share banking information over email, which is also a source for hackers and cyber criminals to strike.

Contact paymints.io today to learn more about how this money transfer platform can benefit your business and all involved in a real estate transaction.

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