Tips for Avoiding Wire Fraud in Your Next Real Estate Transaction
By Greg Geilman
It is a buyer’s worst nightmare, and it could happen to almost anyone. They wire over a significant amount of money to an account as part of settlement on a real estate transaction. Hours or perhaps a day or two later, they realize that the money never arrived. People in this situation are victims of a fast-growing form of fraud, one that targets real estate wire transfers. With this information, buyers can understand what to expect, and how they can protect themselves.
What Is Wire Transfer Fraud?
When people buy a homeor engage in another kind of real estate transaction, they often wire a large sum of funds to the title company as part of the settlement. This might range from thousands of dollars to millions of dollars, depending on the purchase. Wire transfers make iteasier for all parties involved to prove where the money came from, to avoid any question of illegal sourcing of the money. However, thieves have realized that they can often divert all or most of these funds to themselves, if they can confuse the sender into using the wrong account number.
How Big of a Problem Is Real Estate Wire Transfer Fraud?
Although many people would like to think that this could never happen to them,fraud through real estate wire transfers is growing dramatically.In 2016, according to FBI reports, hackers attempted to steal about $19 million in real estate settlement funds. In 2017, that number had exploded to $969 million. Receiving information from a source they believe they know makes people more vulnerable to persuasion.
How Do Hackers Run a Wire Transfer Scam?
Anyone who has received an email from someone they know that looks like obvious spam understands that email accounts can be hacked fairly easily. Scammers look for an opportunity to peruse the emails of someone associated with the saleor purchase of real estate. It might be a real estate agent, escrow officer, mortgage broker, or an employee of a title company. Once they get into the person’s email account, they can send false emails to people who are preparing to make a wire transfer of money. The emails usually contain information with a faulty account number, in the hopes that the recipient will send their settlement funds there. Overly trusting parties to a real estate transaction may find the request no different than the many other requests for the relevant documentation needed for the sale.
Do Buyers Have Any Recourse Against Fraud?
For victims of the fraud, this type of theft is so damaging because there are relatively few protections available. In many cases, once the money has been transferred, it is beyond the reach of most authorities. Some people are finding ways to retrieve at least a portion of their lost funds through the FBI’s Financial Fraud Kill Chain. This tool may allow the organization to stop the transfer, but only if they discover it in time. However, if the wire transfer occurs domestically or does not exceed $50,000, the FBI may choose not to get involved. This could leave people with less at stake personally on the hook for every dime they lose.
What Can People Do to Protect Themselves?
In the past, many people have learned that they should not automatically trust anything they read in an email or hear in a phone call. Scam artists have become adept at providing persuasive arguments in both forms of communication. Buyers who want to avoid making this a problem can do the following:
• Ask agents and other real estate professionals how they protect their email account information
• Keep track of contacts at relevant organizations related to the transaction, with an independent list of email addresses and phone numbers
• Verify with the title agent all information received, especially account numbers
• Avoid sharing any personal account data in email, or any unencrypted format
Buyers who are constantly on the watch for suspicious information, and follow up with established contacts on all communication they receive, may be better able to prevent this theft. Protecting against the growing threat of real estate wire fraud calls for attention and critical thinking. When buyers question everything they receive, and double-check information with sources they know they can trust, they may be able to avoid becoming a victim.