Wire fraud can’t happen to you, right? Think again. The sophisticated schemes run by today’s con artists leave everyone susceptible. An FBI report revealed Americans lost nearly $150 million due to real estate fraud in 2018. Hackers often target real estate for wire fraud. Educate yourself and take these vital measures to protect yourself from potentially losing thousands and your dream home to real estate wire fraud.
What is wire fraud?
Wire fraud happens when someone schemes to obtain money through false pretenses using interstate communications, like email or telephone. The United States considers wire fraud a federal crime.
In real estate, the schemes target large-scale fund transfers usually associated with closing a sale. It’s difficult to recover wired funds because they are intended to be immediately available and settled.
A real estate writer nearly lost her down payment to a hacker, as documented in her Forbes article. Educating yourself on how these schemes work is crucial to preventing wire fraud.
How wire fraud works
In a wire fraud scheme, the criminal acts like someone you trust: the real estate attorney, closing company, or financial representative. They send fake communications requesting funds be sent immediately with instructions on how to wire it.
The FBI reports Business Email Compromise (BEC) is the leading concern when it comes to fraud. The email will request the wire payment in a way that looks legitimate but actually sends the money to the criminal. The spoof can be as real as only a slight misspelling of someone’s email address.
BEC happens when the criminal hacks into the Realtor, mortgage lender or a title company server to find upcoming real estate closings. They use their stolen contact information to email fake wire-transfer instructions about a specific closing to the buyer or bank. Since it looks legitimate, the buyer or bank wires the funds, and the criminal walks away that much richer.
Steps to prevent wire transfer fraud
1 – Never email financial information
Email is not a secure way to transmit vital information. Never send your financial documents or identification-related numbers through email. If it’s important, have a phone conversation, set an in-person meeting, or use certified mail.
2 – Know the closing process
Once a real estate purchase agreement has been signed and a title company chosen, it’s vital the escrow or title agent communicates how the transaction will proceed. When real estate agents partner with a company like Independence Title, you learn exactly what to expect. Any deviations will send up a red flag.
3 – Beware the sense of urgency
An email from a trusted source will not impress upon you a sense of urgency to send the funds. Be suspicious if the sender is emphasizing the need to act immediately.
4 – Pay attention to the details
The communications fraudsters send look incredibly legitimate, but if something seems like it’s not right, follow your instincts. Look closer at the request. Does it have poor grammar or misspellings? Was it sent outside normal business hours? Perhaps the links aren’t really links at all, or they direct to a non-existent website.
5 -Verify the wire transfer request
Always call to check wiring instructions even if the request looks valid. On the call, ask the representative to state their name, the account number, and exact amount due. Be aware that scammers can create fake phone numbers. You need them to verify the details without prompting from you.
6 – Use call-back or two-factor verification
Secure your communications with the title company or closing agent using a passcode or another two-step process. A call-back verification process adds a layer of security.
7 – Partner with people who value security.
Title companies must take multiple steps to secure client information. Not sending information via email is a small step. Since schemes are constantly evolving, they must actively monitor systems for compromise, follow secure protocols for communication, and have firewalls and other measures installed on their servers. Talk to your agent or title company about how they are protecting your information.
Preventing real estate wire fraud
The best way to prevent wire fraud is education and prevention. It’s up to all of us to stop fraudsters from gaining sensitive information like email addresses and transaction details. Working together, we build client trust and stop real estate fraud in its tracks.