Check Fraud – Things to Think About

by | Oct 16, 2015 | Legal Tips

Before I get to this week’s tip, I hope that everyone is safe and that those who did suffer a loss are recovering. I am extremely proud of our local real estate industry for the amount of support and help they have shown our fellow South Carolinians.  We are an amazing industry that always steps up in a crisis. I am proud to be part of that industry. It may sound cliché but we are South Carolina Strong.  

It should come as no surprise that check fraud is rampant particularly in the real estate industry.  Anyone with a home computer and a printer can create a “Cashier’s Check” that is identical to a bank issued check. Attorneys and real estate agents cannot tell fake checks from real checks.

In South Carolina, we have seen many incidents where the client presented the closing attorney a fraudulent check.  A noteworthy case occurred when a cash buyer presented the attorney with a fraudulent cashier’s check for nearly $1 million.  When the check was dishonored, all checks issued at the closing were dishonored including the real estate commissions and seller’s proceeds.  A more common occurrence happens when a deficit closing seller utters a fraudulent check and then moves to another state. While we know where the buyer lives, the seller may give false information and be beyond our reach to get the funds back.

As a result of the increase of check fraud, attorneys began requiring wires to be issued for closings. The Supreme Court of South Carolina ruled that if a lawyer accepts funds that are later dishonored, the attorney has 5 days to replace the missing money.  As a result most lawyers have implemented a small threshold of $10,000 or more for wires. As we move forward in this new TRID world, you should expect a much lower threshold.  This is a unfortunate fact that we all will have to live with in the future.  Please prepare your clients upfront that they most likely will be required to wire funds. Wires help protect your commissions and the seller’s proceeds.

Have a great weekend.

Photo by jridgewayphotography

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