Scenario: Title Company opens a sales transaction. The sales price was $379,900. The buyer was purchasing the property for cash, no financing. The purchase agreement required an earnest money deposit in the amount of $5,000 but the buyer remitted a check for the full sales price. The check was a company check and was drawn off a national bank in the New York Federal Reserve.

The Title Company/Escrow Officer deposited the check and sent out third-party deposit instructions to the buyer’s real estate agent. She also notified the buyer’s and seller’s real estate agents the funds remitted were from a third-party and could not be applied to the transaction until the third-party deposit instructions were fully executed.

The buyer’s real estate agent confirmed with the buyer the transaction was opened via the following email chain forwarded to Escrow by the agent:

“Hi there!

I hope you’re doing well! I wanted to let you know title received your funds and they have been deposited into escrow! Yay!

They should be in touch with you for directions to sign, whether you choose to do that electronically or in person.

Do you know when you’ll be in the States? Let me know, I look forward to handing you the keys!

Please let me know if you have any questions, or if I can assist you in anything else! Looking forward to hearing from you 🙂

Real Estate Agent

Licensed Real Estate Broker

International Real Estate Company”

The buyer responded:

“Thank you for the update. I plan to be in USA next month hopefully after the pandemic subsides. Thank you for your assistance so far, look forward to seeing you. Stay safe.”

Agent replied:

“Ok, sounds great!

Our close date is April 29, 2020, if you desire to sign in person then we will need to extend our close date. As we get closer to the 29th we will need to have a more solid date for your arrival so that we can request an extension. I’m sure the seller will be willing to cooperate given these uncertain times. On the plus side, this state seems to be doing better with regards to this pandemic, maybe restrictions will be loosened quicker than previously thought.

On the other hand, if you sign electronically we can close as scheduled and I’m more than happy to keep your key securely at my office or in a lock box at the home until your arrival.

I’m happy to assist in whichever way you choose 🙂

You stay safe as well!”

Buyer responded:

“Trust you had a good Easter celebration? For me, I have been in high spirits until today. As in accordance with guidelines for travelling within the country over here, we had to undergo a mandatory COVID–19 test, as a perquisite for travel. Unfortunately I have tested positive and have to self–isolate. Though I am asymptomatic, I have to isolate and will not be able to travel for now. I will appreciate your support and guidance at this point in navigating our transaction. I will update and solicit your help in moving this forward.”

Agent replied:

“I very much enjoyed Easter this year, I missed our usual family get together traditions but we made the best of what we had! Thank you for asking!

Oh no I’m so sorry to hear this! I can’t believe the moment in time we are living in, it is truly surreal!

Have you been told how long you need to self-isolate?

How we move forward from here is really up to you.

One option is we ask for a deferred agreement via the COVID–19 addendum form. With this agreement we would gain a bit more time than with a general sales agreement addendum. The COVID–19 form states circumstances are directly related to the pandemic. In it the deferred timeline is for a recommended 20 additional business days, but you can make this any amount of days you deem necessary. (I would imagine you would not want to ask for more than 30 business days, as the seller’s would probably not agree).

Second option would be to submit a sales agreement addendum. With this addendum we could simply ask for an extension for our close date, however I don’t recommend submitting this with an extension larger than two weeks.

Your third option is to close on time with an electronic signature on all closing documents via the Title Companies instruction. I’m more than happy to securely keep all keys to the home until you arrive. If you are concerned, I can forward you a contact for a general watch keeper company that can look over the property in the event that you can’t make it here as quickly as you’d like.

I’m so sorry you are going through this! What a terrible feeling it must be! Glad you have no symptoms though, if you need recommendations for some good tv shows I know a few 😉 Hang in there!

Please let me know if you have any questions, and yes please keep me updated so we can take the proper action.”

The Buyer responded (to Escrow):

“Thank you for your mail. Happy you had a good Easter. Before I got your mail, I already spoke with my investment managers, and they have advised that since the funds are interest accruing, it would be foolhardy to tie it down, and leave it idle for weeks. So I would take option 1 preferably. I have come to the conclusion that $325,000 should be sent to the receivers account at the end of this message. There is an investment window for shipment of medical equipment which I would be investing in, with a return on investments in a couple of weeks when I will be cleared to travel. I will humbly still retain your services, and we conclude this purchase then. I once again appreciate your diligence and professional services provided me. Thank you and I await your urgent action on the subject.”

BANK OF FAR OVERSEAS

SWIFT CODE: ABCDEFGH

BENEFICIARY/ACCOUNT NAME: LEEHIGH TRADING COMPANY

ACC NO: 090909090909–12

BENEFICIARY ADDRESS: Highrise Tower, 6565 Main Street, Far Overseas

The Escrow Officer reviewed the file and reached out to her management and National
Escrow Administration. She was unsure whether the check had cleared the bank. It was deposited on Thursday, April 9, 2020.

The buyer was asking for a refund of $325,000 from his check on Monday, April 13, 2020. Escrow knew that was too soon for the check to be unconditionally collected.

There were other red flags. The Escrow Officer had not had direct contact with the buyer who was asking the refund be paid to an unknown party. She knew this scenario did not sound right. She emailed a copy of the check to the National Escrow Administration team and asked when it would be available to disburse.

Upon receipt, the Escrow Administrator knew the check did not look right. They instructed the Escrow Officer to reply to the buyer letting him know it would take at least 10 business banking days for the check to clear. In the meantime, her escrow administration reached out to the corporation who cut the check to verify it was validly issued.

By the next morning, Escrow Administration spoke to the manager of accounts payable at the corporation, who confirmed the check was not valid. The escrow administrator instructed the Escrow Officer to resign from the transaction immediately so the seller could put the property back on the market and sell to a legitimate buyer.

The Escrow Officer did just that. After receipt of her resignation, both the listing agent and selling agent looked closer at the details of the transaction and the check remitted by the buyer. They, too, decided to cancel the agreement.

We close transactions even during uncertain times but it does not mean we throw years of risk mitigation processes out the window. The Escrow Officer recognized all the signs and proceeded with caution. She saved the Company a potential loss of $325,000. Had she complied with the buyer’s request those funds would never have been recoverable.

Article provided by contributing author: Diana Hoffman, Corporate Escrow Administrator FNTG/National Escrow Administration