Real Estate Wire Fraud: The Digital Heist You Need to Understand and Prevent

Posted by Robin Maynard on Thursday, July 25th, 2024  3:34pm.


How to Beware of Real Estate Closing Scams

Mortgage wire fraud can transform a homebuyer's dream of home ownership into a nightmare, potentially causing crippling financial losses. CNBC reports how a Silicon Valley tech industry veteran was among the latest victims, speaking to the increasingly sophisticated nature of cybercrime. 

Just days before the closing, Rana Robillard received what appeared to be a response to one she had sent her broker, inquiring about the final steps before the closing. She wasted no time sending the money after receiving an email from her mortgage broker with directions to wire a nearly $400,000 down payment to a JPMorgan Chase account. Little did she know, this email was sent by cybercriminals who had infiltrated the communication chain between Robillard and her mortgage broker.

Real estate transactions, known for their large amounts and frequent wire transfers, have become especially attractive to criminals. Wire transfers are fast, often closing within 24 hours, can manage large sums, and are typically irreversible, making them perfect for fraud.

Real estate wire fraud typically begins with cybercriminals hacking into the email accounts of individuals involved in a real estate transaction. Once they gain access, they monitor the communications and, at a critical moment, send fraudulent emails that appear to be from a trusted party, such as a real estate agent or title company. These emails often instruct the buyer to wire their down payment or closing costs to a different bank account controlled by the scammer.

Over the past decade, scams involving fake emails in real estate deals have surged, with losses reported by the FBI escalating from under $9 million in 2015 to $446.1 million by 2022.

Scammers are highly sophisticated and employ various tactics to deceive buyers into thinking they are communicating with their agent or another trusted individual. They often use email addresses or phone numbers that closely resemble those of the agent or lender. These communications contain personal information that only the agent or lender would typically know, making them seem legitimate. Additionally, malicious actors use specialized software to "spoof" or imitate an agent's phone number or email, giving the appearance of a genuine call or email.

The good news is that many professionals in the real estate industry now make it part of their practice to be clear about the threat.​ Real estate agents should clarify that wire instructions come directly from the title company, banks should verify receiving accounts, and mortgage brokers should use secure portals for document sharing. But it's important for homebuyers to be aware of current phishing tactics so you can protect yourself and make it safely to closing. 

How to Protect Yourself

"An ounce of prevention is worth a pound of cure." It's far easier to prevent issues than to fix them later. Here's how to spot and avoid mortgage wire fraud:

1. Know Your Closing Process

Understand your closing steps before your money is due. Discuss details with your real estate agent, lender, and title company in person or over the phone. Avoid discussing via email, as fraudsters can intercept it.

2. Write Down Contact Information

Keep a list of contact methods for everyone involved in your transaction. Write down names, phone numbers, email addresses, and other relevant information. The Consumer Financial Protection Bureau's Closing Checklist is a helpful tool. Don't email this information; keep it secure.

3. Beware of Last-Minute Closing Changes

Scammers thrive on creating urgency and confusion. Be skeptical of sudden requests to act quickly or send money, especially if communicated via email.

4. Call to Confirm Any Wiring Instructions

Verify wiring instructions by contacting a trusted representative in person or over the phone. Use known phone numbers, not those from emails, as scammers can spoof them.

5. Never Email Your Financial Information

Avoid emailing financial details, even to trusted contacts. Instead, share important information in person through meetings or phone calls. 

Utilize a secure file-transfer service to send the necessary documents for your home purchase, or use a secure client-access portal established by the business (whether it's your title company, mortgage broker, etc.).

Be wary of any communications that deviate from the established protocol, such as requests to email information that you have previously submitted securely through a portal.

6. Be Wary of Phone Conversations

Scammers can spoof phone numbers. If a call seems suspicious, trust your instincts—hang up and contact a trusted party using a known number.

Following these steps can better protect yourself from mortgage wire fraud. Always prioritize secure communication and verification to ensure your transactions remain safe.

Actions to Take If You Suspect You've Been Scammed

If you believe you're a victim of mortgage wire fraud, stay calm and follow these steps:

1. Contact Your Bank or Wire Transfer Company Immediately

Contact your bank or wire service at the first sign of trouble. Request a wire recall immediately after the transaction. Taking immediate action increases the chances of recovering your funds.

2. File a Complaint with the FBI

The FBI's Internet Crime Complaint Center (IC3) may assist fraud victims. Submit a detailed report to improve your chances of getting help.