Now it’s the Chinese! Before that it was the Japanese. Before that, the English. The scam is an enticing one at first glance for real estate agents and then for an unwitting attorney.
Your day starts out normal at the real estate office. Then you receive an e-mail from China. The sender identifies himself and indicates that he has noticed your listing for that expensive home in the foothills. The sender is interested in purchasing the property since he is coming to live in Tucson and is willing to acquire the property sight unseen. Not only is he willing to consider paying full price since he is so very interested in just that property but he will pay all cash and needs a quick closing – of course. So draw up the purchase agreement now and get it to the buyer. The quicker the better! Wow! What a deal –the commission – both sides – will be $32,000.00!! Let’s get it on, right!?!?
The sender then indicates that since he is from China and not that familiar with the process of acquiring property in the United States he would want a local attorney to work with him. Do you have any recommendations for an attorney who can assist him in buying the property? Why of course you do! You may even give him three such names and their e-mail addresses!
The party then e-mails one of the attorneys and indicates his desire to acquire the property in question from you, the agent. He requests the attorney contact the agent and begin representing him if that is appropriate and asks what the attorney fee will be. Naturally the attorney jumps in and responds as to what the fee will be. The client quickly responds – “No problem!” The trap is now beginning to be set.
The buyer then indicates to the attorney that the terms will be ‘all cash’ and as to the attorney fee – no problem. Buyer indicates to the attorney to contact the real estate agent to get a copy of the contract. The attorney does. Buyer also indicates that he is not familiar with working with escrow companies so he wants to be protected so he will send all of the funds, including the attorney fees, to the attorney to put into his/her trust account for later disbursement as appropriate. It couldn’t be simpler. The ‘standard’ AAR contract, all cash and a quick closing.
Then the e-mail comes indicating the buyer will send certified funds. In fact the buyer is going to send excess funds of $25,000 to be deposited into the trust account that the buyer wants transferred to a third party. Sure enough a certified funds check arrives at the attorney’s office and it is immediately deposited into the attorney trust account. Immediately following that an e-mail arrives from the buyer indicating that he sent in excess funds which he needs transferred to a third party as part of the transaction. So says the buyer – If you, the attorney, would please take your full fee now, even though the real estate deal is not yet completed and send a check for the excess funds of $25,000 to his correspondent bank in Canada then the balance of the funds can be transferred to the escrow company and all will be fine – right!!! You probably see where the scam is already.
If the attorney follows those instructions then the attorney just dug himself or herself into a very deep hole and might as well pull the dirt in after. The check for certified funds is duly returned from the attorney’s bank indicating that the certified funds check is a fraudulent check. Yes, it certainly looked exactly like a cashier’s check. If the attorney falls into the trap, the attorney wrote a check out of their trust account for their fee and wire transferred a $25,000 check to the appointed bank in Canada or wherever and the balance of the funds got transferred to the escrow account with the escrow company named in the purchase agreement.
About a week later when the attorney is notified that the cashier check was bogus and did not “clear” the attorney realizes that he or she has been ‘had’. By that time it is too late. The $25,000.00 came out of the attorney’s trust account which drew upon other client’s money in the trust account and was sent to the “buyers” account in Canada which the buyer immediately withdraws and is long gone.
At that point the attorney is responsible for the lost funds in his or her trust account and must immediately replace those funds into the trust account with “good” funds. In other words the attorney got scammed for $25,000.00. The real estate agent’s dream commission is dashed on the rocks. It is all one big scam.
Our office has had lots and lots of these attempted scams. Fortunately, we adhere to the rule that no trust funds will ever be disbursed until the deposited funds clear our bank. We check the account daily to insure we know when funds have cleared into our trust account. That precludes any possible temptation to write checks too soon before funds have cleared.
Once you know the basic scam you will find minor variations of it. The latest one we were asked to participate in was just two weeks ago. We advised the agent that more than likely it was a scam and not to get excited about the potential commission since it most likely will not materialize – and it didn’t.
While very few real estate companies today maintain a trust account the same scam could be pulled directly on the real estate company if the funds were to be deposited into the real estate firm’s trust account. One big moral of this story is to NEVER disburse funds from a trust account until you know the funds are actually there – in other words the funds cleared. To do otherwise is to be writing a trust check on other people’s money already in the trust account. Avoid doing that at any cost. It may be tempting to do that. Cashier’s check can have a ‘stop payment’ placed on the funds and the check won’t clear and you already wrote funds on it; your loss, so avoid the temptation.
It just proves up the old saying that if a deal appears too good to be true it probably is too good to be true! Have a good and profitable day.