Wire Fraud in Real Estate Transactions Is on the Rise

Criminals of today are clever, and wire fraud in real estate transactions is an easy way to make a small fortune. These hackers can steal hundreds of thousands of dollars in a heartbeat without the buyer, the closing agent or the financial institution being any the wiser. By the time the buyer discovers the scam, the money is long gone.

Wire transfer scams involving real estate closings are the modus operandi of these hackers. The loose structure of home closings makes it easy for crooks to hijack the process. These transactions are typically fast and furious, and they leave a lot of holes through which criminals can enter.

Additionally, the use of unencrypted email to communicate delivery instructions, including where to transfer money at closing, creates a security breach that criminals use to their advantage.

The FBI claims that wire transfer fraud in real estate skyrocketed by 480 percent in 2018. The information supporting this claim was submitted by various closing agents and title companies using the FBI’s Internet Crime Complaint Center.

Here’s How it Happens

The cyber-criminal gains access to the email server or the computer system of the title company or lender. Once inside, the hacker searches for upcoming real estate closings. Then, the scammer emails the buyer, lender, or financial institution with fake instructions about where to send the money. Because the email looks legitimate, the buyer or financial institution sends the money as instructed, and the faker makes off with the loot.

No one will suspect a problem until the title company or the closing agent tells the buyer that the promised funds have not materialized.

Here’s How to Avoid It

Safeguards should be put into place that guard against wire fraud in real estate. Protective measures should include the following procedures:

• Arrange to call the title company using a previously agreed-upon phone number to ascertain that the wire transfer delivery instructions sent by email or fax are correct.
• Create a password with the closing agent or title company to be used in the call-back and verification processes.
• Work only with title companies that use encrypted emails when sending wire transfer instructions.
• If the buyer receives transfer instructions by email, verify that the same information was received by the title company or closing agent. Never transfer money before first validating that the transfer information is correct.
• Watch out for fraudulent emails that arrive outside of regular business hours. These communications may contain misspelled words, grammatical errors, or a tone of urgency.
• Be especially wary of emails with modified payment instructions. The changes can include switching from a certified check to a wire transfer or changing an account number at the very last minute.

Title agencies can protect themselves from wire fraud in real estate by verifying that the transfer instructions they receive are authentic and legitimate. In addition, executing on a corporate strategic fraud prevention program is essential.

Dalton & Finegold utilizes the best practices to prevent fraud. We have studied these issues in depth and are constantly updating our knowledge base as to the future of cyber fraud. For a safe, secure, and seamless real estate closing experience give us a call today!