New Money Scam

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Denise L. Evan’s Real Estate Advice has posted an article about a new money scam that has been going around.

The scam works when an “overseas buyer” contacts a real estate agent and puts an offer in on an expensive house for sale. The buyer says they don’t need to see the house before signing the contract because the online information is so thorough. So they sign the purchase contract and even put down a large deposit. When they send the check to the real estate agent, it looks legitimate–and is even the trust account of a large law firm. If the agent were to contact the law firm they would be told both the account and the account holder are legitimate. The check is even bigger than the money deposit amount and doesn’t seem suspicious in any way.

The instructions that come along with the check say that a portion is to be used for the earnest money, and the balance should be sent to another account that the buyer will use to buy furnishings for the house.
You wait ten days to make sure you have good funds. Nothing bad happens. You write a check, or you wire transfer the money, for the “home furnishings” account, and retain the balance as the earnest money.

If the real estate agent contacted the law firm’s CFO or another managing partner, they would be told that the check is a “first class forgery.” People usually don’t take the extra step of contacting the law firm to verify the check and just wait the 10 days and assume everything is fine if the check goes through without any problem.

The genius of this type of scam is that law firms typically only check their account balances every 30 to 60 days or so. A large law firm almost always has enough in its account to cover a cashed check- real or fake- so the check doesn’t bounce and no attention is drawn to the situation. Eventually, someone at the law firm will go in and balance the account and notice the forged check and will notify the bank, which will immediately put the money back in the firm’s account since a “forged drawer’s signature” is illegal. The firm’s bank then back-charges the money to the real estate agent’s bank to take the money out of the agent’s account.

Since the agent was the first person to take the fake check, the whole fiasco means that they have to net the loss personally.

All this charging back and taking money out of accounts happens pretty quickly once the law firm reports the check was a forgery. If the check you received was $30,000, and $20,000 was supposed to be earnest money and $10,000 sent to the home furnishings account, then you will still have the $20,000 in your trust account. The bank will take that money-no harm to you. BUT, the $10,000 you sent to the home furnishings account will be long gone. The bank will take $10,000 of other trust funds out of your trust account, causing you all sorts of problems.

If you don’t have enough money in your account, your bank will sue you for it. You will have absolutely no defenses to any of this. Yes, you can sue the people who committed the fraud, but how are you going to find them?

To avoid a scam like this one, you should always check whitepages.com or some other source to get the phone number of a law firm that supposedly has just issued you a check. Contact them to make sure the check is legitimate and you’ll save yourself a lot of grief and, ultimately, a lot of money. Calling the phone number on the check wouldn’t be beneficial; you would likely end up talking to the scammer who would pretend to be the CFO of the law firm.

If you have been a victim of a scam or some other type of fraud and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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