Chicago Title identifies earnest money fraud scheme

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Chicago Title’s South Carolina state office sent a memorandum to its agents on July 26, entitled “Checks Drawn on Foreign Banks.”  I wanted to share this valuable information with all South Carolina practitioners even though this particular fraud scheme has not been reported in any South Carolina transactions. Knowledge is power! Let’s stop this scheme at our borders.

The memo points to buyers who tender counterfeit cashier’s checks from Canadian banks as earnest money deposits. The fraudster quickly backs out of the transaction and requests a refund. Because foreign checks can take more than thirty days to process, the refund requests are made before the checks can be negotiated.

The scheme has been used in at least nine Midwestern states. The common facts are:

  • The offer to purchase provides for an all-cash transaction.
  • The selling broker has never met the buyer.
  • The buyer has not physically viewed the property.
  • The buyer is located outside the United States.
  • The initial deposit exceeds the required earnest money deposit.
  • The deposit is in the form of a check drawn on a Canadian bank.
  • The buyer requests that the funds be returned by a wire to their account.

Chicago Title advises that its agents should not accept foreign checks at all. Instead, agents are advised to insist on wired funds. This is great advice which will assist you in working within our ethics rules and in protecting your trust accounts. You don’t want to be in the position of having to replace lost funds! Be careful out there!