You can avoid headaches and losses, or even intentional fraud, by requiring certified funds or wire transfers for earnest money.

A recent experience on a local transaction involving a large earnest money deposit illustrates the potential danger of accepting a personal check instead of certified funds. In that transaction, a personal check was initially accepted as earnest money in excess of $95,000. After the check was deposited, it cleared the local bank 15 days ahead of closing. However, prior to closing, the foreign buyer canceled the transaction and asked to have the funds wired to him immediately. Only after that point did the local bank learn and notify the real estate company that the personal check was counterfeit. Fortunately, the funds had not been wired back to the foreign buyer.

In other instances, once the earnest money is on deposit, the fraudulent buyer requests a significant portion to be delivered to a third party, typically a fake furniture company. Several local agents have been contacted under similar scenarios, with communication by email, and each time the purported buyer uses a different name, occupation and country of origin.

Please be sure not to fall victim to this check kiting scheme! Legitimate buyers do not purchase property abroad without viewing the property personally or someone doing so on their behalf. In addition, it is not common to provide an earnest check of 30 to 50 percent of the home’s value.

To ensure you don’t process fraudulent transactions, the safe course of action is to require certified funds on deposits or on quick closings.

Information regarding this attempted fraud has been turned over to the Missouri Attorney General’s office.