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Avoiding check fraud with Earnnest
Case Study

Avoiding check fraud with Earnnest

When Anne Hernandez heard her homebuyer was unable to purchase groceries due to check fraud she knew it was time to switch to Earnnest.

George Clements
September 14, 2021

Anne's story*

*True Earnnest user story. Names changed for privacy.

Anne Hernandez has been in the real estate business for decades. Collecting homebuyers' earnest money payments using paper checks has been the norm for most of that time. But what Anne and her client discovered the hard way is that check fraud is increasingly on the rise.

The deal started like any other house purchase—happy clients deciding on the perfect place after an extensive home search. Next step: the earnest money deposit. The client wrote a paper check that Anne delivered to an escrow agent. During the process of scanning and electronically recording the check, a criminal inserted themselves in the transaction, obtained the buyer's sensitive banking information from the check and cleaned out the buyer's bank account.

The fraud was not discovered until the homebuyer attempted to purchase groceries but the emptied account didn't have the funds required to make the purchase. The client shared with Anne that they had to make do feeding their kids with the food already in the house because of the crime. "I knew that I had to make a change," Anne said of the incident.

Check fraud: a real risk

The real estate industry continues to see increases in fraud cases. According to the FBI's Internet Crime Report the real estate sector saw $213 million in losses and 13,600 victims in 2020. Many agents and escrow holders understand the dangers of wire fraud, but less well known is the risk of using a check.

Checks have been around for centuries, so you may think this traditional payment method is safe to use. However, checks contain sensitive banking information printed clearly on the front. That piece of paper is only as secure as where it ends up. Check fraud occurs when someone makes an effort to obtain money illegally using paper or digital checks by writing a bad check from their account, forging a check in someone else’s name, or using a completely fake check.

In real estate, check fraud often occurs during the process of collecting, scanning, and emailing the paper check for record keeping. Criminals gain access to scanned checks by intercepting emails. From there, they'll use the account information printed on the check to connect to and empty the homebuyer's bank account.

The Earnnest solution

Anne first heard about using digital payments via Earnnest while at a trade show. After hearing other agents talk about the service she was ready to give it a try to make her transactions more secure. Anne shared how easy it was to get started. "I found my escrow holder right there in the app ... the particular attorney that I had used was already listed in there. Since then I have added additional ones."

The increased security has been a game changer for Anne and her homebuyers. "Earnnest has effected the way I do business with my clients because it gives them security," Anne explained. "They don't have to worry about a check any longer ... it's an easy way that they can have their transaction handled seamlessly." She went on to say her clients are, "very comfortable using Earnnest."

As Anne Hernandez discovered, the most effective way to protect your clients from fraud is to stop using checks and wires for real estate transactions, and switch to digital payments. "I decided Earnnest was the better solution because it took away the insecurities. It took away the fear of ... what's happening to the money. I'm able to see that it's very secure and it's a great way for my clients to transfer this money without having to worry."

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ABOUT THE AUTHOR
George Clements

Real estate agent and real estate developer George Clements is a South Carolina mega agent with 15 years of experience in residential real estate and real estate development. He co-founded Earnnest in 2017. George brings an endless supply of real estate knowledge and vision to the Earnnest team. He has experience from every perspective of the industry, including: individual agents, teams, groups, independent brokerages, franchise brokerages, builders and developers. George has served on multiple real estate technology committees and non-profit boards.