Real Estate-Ese – What Does it Mean to Wire Funds?

Oceanside Real Estate Market report

While it may seem like a simple concept, “wiring funds” is a key part of a real estate transaction. And not everyone knows about wiring funds or how it is accomplished.

Wiring funds is accomplished by sending money electronically from your bank account to another bank, in the case of a real estate transaction to the bank the escrow company uses.

The first time you do this is when you have reached agreement on your offer with the seller and escrow opens. Per our California contract your deposit (also called Earnest Money or Earnest Money Deposit [EMD]) is required to be deposited within 3 business days. While you could send a check or drop one off, wiring the funds is far faster and most secure, especially when you are talking about thousands of dollars. And a check takes days to clear.

You should know that when you send your down payment before closing, which will typically be a much larger sum of money, escrow will require those funds to be wired.

And while we’re on the subject of wiring funds…there is the issue of WIRE SCAMS that are happening these days.

Escrow will share “wiring instructions” with buyers, typically a PDF file attached to an email (in those states where the Title Company holds the funds during the transaction, or an attorney does, they issue the instructions). These instructions outline all the bank information your bank needs to identify your wired funds so they end up in the correct bank account. These instructions normally include the name and address of the bank, and the specific account number, among other information.

The scam occurs as follows. Sometimes email accounts get hacked, and the hacker can now read the emails relevant to a real estate transaction. The hacked then sets up a bogus bank account using identifying information from the escrow company (or Title or attorney), sends you the fake wiring instructions in an email that look legitimate, and you dutifully wire off your funds to the hackers bank. MAJOR PROBLEM. Sometimes the funds can be recovered, sometimes not.

Because of these potential fraud issues we always verify the wiring instructions over the phone to make sure that what has been emailed Is the legitimate bank information where your funds should be wired. Some escrow companies are now sending these instructions in an encrypted format, or with 2-part identification and passwords to guard again this scam. What LOOKS legitimate may be a really good scammer!