Buying a home is, undoubtedly, one of the most exciting and scary moments in your life. Maybe it was the yard, or the neighborhood, or crossing the threshold for the first time, but something about your soon-to-be home felt right from the start. You want, and should expect, the same confidence and security from the transactions that realize that home for you and your family. That’s why you need to be aware of potential risks, like real estate wire fraud.
Like any major purchase these days, buying your home requires a lot of paperwork, a lot of signatures, and a lot of communication back and forth between you, your agent, and your lender. Each of those transactions presents an opportunity for someone who knows how to work the system to gain access, mislead you, and defraud you of your money. In the same way you wouldn’t leave your home open to criminals, you can and should take the same care to prevent fraud. Your home purchase should be a milestone event to celebrate, so it's important to understand how to recognize and prevent wire fraud.
- What is Wire Fraud in Real Estate?
- How Do Wire Transfer Scams Work?
- 4 Tips to Identify & Avoid Wire Fraud
- 4 Actions to Take if You Think You're a Victim of a Wire Transfer Scam
- Be Proactive for Protection
What is Wire Fraud in Real Estate?
In many regions of the U.S., the housing market is booming and where there’s that kind of economic activity and money changing hands, there’s certainly going to be some bad actors looking to find a way to capitalize. According to the National Association of Realtors, wire fraud in real estate is one of the fastest growing cyber crimes impacting nearly 12,000 people to the tune of nearly $221 million.
When it comes to wire fraud in real estate, individuals impersonate the real estate or title agent, mortgage broker, or an attorney representing one of those parties and send an email to the unsuspecting buyer with information about closing costs, down payments, or other payments needed. They will also include details on how to wire those payments to the fraudster’s bank account and wait for the money to come in.
How Do Wire Transfer Scams Work?
Wire transfers, to start, involve the transferring of funds, electronically, from one bank to another. They’re great because they’re typically quite fast in comparison to other types of transfers or payments; however, this is also why they're a great target for fraud. There’s no way for you to stop payment or get the money back once it’s been transferred.
Through publicly available information, lax security protocols, or phishing scams, fraudsters gain access to the email accounts of those involved with the real estate transaction. Using this access, the criminal will request a wire fund transfer from your bank to theirs.
Knowing a buyer is in the middle of a major financial transaction, criminals will hijack your agent’s email and send you an email notifying you of a change in bank accounts and letting you know you need to transfer the funds immediately, often at the risk of losing the home. As they have hijacked your agent’s email, everything will look legitimate, so typically, the buyer will go into action.
The buyer initiates the transfer from their bank, providing the information for the payee including bank name, routing number, and account number. While further information may be required, there’s not much more to it than that. Sounds easy, right? That’s also what makes it a perfect target. In fact, it might be, in some cases, the most hassle free part of any real estate transaction.
Criminals are looking for opportunities. Because so many transactions are happening via email and your lender is likely a trusted contact, when an email you're expecting comes in, most people don’t think twice. For that reason, you should be wary of any changes in information or fund requests that come via email, particularly when they involve large sums of money or major purchases, like a home.
4 Tips to Identify & Avoid Wire Fraud
As noted, and argued in the criminal justice space, crime does not exist without opportunity. So, one of the best ways we can stop ourselves from becoming a victim of wire fraud in real estate is to learn to identify and avoid instances of wire fraud. If something doesn’t seem right to you, an email is different, the writing style is different, there’s a sense of urgency that seems off, listen to your intuition. Thankfully, there are also a few quick and easy ways to avoid this scam.
1. Be Proactive
When you identify the individuals you’re working with, be that lender or agent, do your research. Investigate whether this has been an issue for them in the past. Inquire about the security measures they have in place for their email accounts and any devices being used to communicate with clients.
2. Communicate and Verify
Communication is a great way of avoiding trouble. When you get a request from funds from anyone, especially on your real estate team (lender, agent, lawyer), call them and verify. Verify they sent the email, the account number, and any other information you have.
3. Monitor Publicly Available Information
While you’re likely eager to share the good news with friends and family, be careful, especially if your social media accounts aren’t secure or private, even more so if you’re likely to use hashtags which make searching even easier. Again, you’re looking to prevent information from being used against you, so keep your information private and share the good news until after you've closed.
4. Avoid Sending Account Numbers Via Email
As a general protocol, avoid sending account numbers or personal information via email. Email security threats are no joke and data breaches that expose user data happen too regularly for you to risk that kind of exposure. It’s just good practice, personal and business. If you must use email to send sensitive information, be sure to use secure software or encryption. Utilizing a services that requires an e-signature on transactions and requests may also be an option.
4 Actions to Take if You Think You're a Victim of a Wire Transfer Scam
If you believe you’re a victim of a real estate wire transfer fraud or any wire transfer fraud, there are a few things you need to do. As noted above, it’s hard to get the money back, but that doesn’t mean you don’t have any recourse.
1. Notify Your Bank
The first thing you need to do is call your bank and alert them. If there is a transaction number, you’ll want to get that information from them as well. Your bank will also need to provide a “hold harmless” letter for the bank that received the fraudulent wire. You’ll want copies of everything they send and any information they have regarding the transaction.
Your bank may be able to issue a recall, but your timing will need to be tight, likely within 24 hours. Because this is likely not the criminal’s first attempt, any longer than that and the funds have likely already been withdrawn and moved.
Further, it’s worth noting that banks can only be held liable if the transfer of funds was unauthorized. Since the holder of the account initiated the transfer, the bank is not responsible. This is regulated under rule 4A of the Uniform Commercial Code. In fact, many banks only require that the sender have authorization to send; there is little oversight regarding the recipient.
2. Notify Your Agents/Brokers/Lawyers
If you haven’t already, contact these folks immediately. They will need to take their own steps for reporting and securing their online accounts. Also, they may have additional information to assist you and may be able to walk you through some of the other steps you’ll need to take, particularly as it relates to the sale of the home.
3. File a Complaint with FBI’s IC3
Your next step is to file a complaint with the FBI’s Internet Crime Complaint Center (IC3). While this doesn’t guarantee you’ll recover your funds as the numbers are not in your favor, the possibility does exist. For that reason alone, and for tracking purposes, provide all the information you have when completing the online form. You’ll need the information you provided to the bank, as well as the information they provided you (transaction number etc.).
4. File a Report with Your Local Police
In addition to filing with the IC3, you’ll also want to file a report with your local police. You’ll want all the information you have as well as the complaint number from the IC3. Some will suggest you also contact a local FBI field office, and you may wish to consider that if the amount you transferred was considerable.
You may have recourse if the name, account number, or other identifying information you sent it to refer to people who don’t exist or the information is different from the account where it was deposited, then no one is entitled to the funds. If you go after the person who committed the fraud, you can file a request with the receiving bank to get information regarding the account owner.
You may also attempt to hold your lender/agent liable. That will, however, require you to prove that they failed to maintain commercially reasonable security protocols to protect their email accounts or that the fraud was intentional. However, those are fairly higher standards of evidence and unlikely to get you the result you want.
Similarly, due to the spate in wire fraud and cyber crimes, many insurance companies covering real estate agents have moved to avoid payouts related to wire fraud and found ways to circumvent that coverage.
Be Proactive for Protection
Sadly, the bottom line is that the old adage “The best defense is a good offense” holds true here. Once the fraud has been committed, once the money has been moved, there’s little left for you to do other than file complaints and wish you could go back and do it differently. Instead, be proactive. Protect yourself and stay alert.
Like everyone else, you want to make sure your online transactions are safe and secure. Cybersecurity and document security are major issues for every organization regardless of size. That's why using services with advanced security features, biometrically authenticated e-signatures, and multiple layers of security should be a priority.
You want the experts on your side, advising you of best practices and ensuring that your business, your customers, and your online interactions are secure. Get in touch with our team and let’s talk about how we can help you stay secure in today’s high risk online environment.