Wire Fraud – A Growing Problem in Real Estate
While you may have heard horror stories of buyers or sellers falling victim to real estate fraud, the vast majority of people never expect it could happen to them. However, given the increase in hacking and phishing scams, there is no better time to take a few minutes to understand risks and better protect your hard earned money.
With today’s technology, the ability to conduct business electronically is a convenience and reality in nearly all parts of our lives. Many industries have been victimized and the real estate business is no exception, especially when dealing with large sums of money. While wiring or electronically transferring funds is certainly a welcome convenience, we all need to exercise extreme caution. Emails attempting to induce fraudulent wire transfers (which appear to be legitimate) are on the rise, with the Consumer Financial Protection Bureau reporting a 1,100% increase in real estate related e-mail phishing scams from 2015 to 2017. Thats a huge increase in only two years with estimated losses totaling almost $1 billion!
Some hackers have been able to intercept transfer instructions sent by email, obtain account information and, by altering some of the data, redirect the funds to a different account. Hackers have also sent e-mails providing false phone numbers when asking clients to verifying wiring instructions. In those cases, the victim called the number that was provided to confirm the instructions, and then unwittingly authorized a transfer to somewhere or someone other than the intended recipient. And it can happen to anyone, like this buyer, this buyer, or this buyer. The stories go on and on with most victims blaming their real estate professional for not educating them about telltale signs of a scam. While a “Wire Fraud Advisory” form is now built into the standard California listing agreement and purchase agreement, many home buyers or sellers breeze over the document, especially when signing forms electronically. So what can be done? Well, here are a few tips to help minimize risk and spot suspicious activity.
1. Obtain phone numbers and account numbers only from the Escrow Officer or your real estate professional at the beginning of the transaction.
2. DO NOT EVER wire or electronically transfer funds prior to calling the escrow officer in order to confirm the transfer instructions. Only use a phone number you were previously provided, instead of a phone number that is received through e-mail.
3. Verbally confirm with the Escrow Officer that the transfer instructions are legitimate. Confirm the bank routing number and account numbers before taking steps to transfer the funds.
4. Avoid sending personal information in emails or texts. Provide that information in person or over the telephone directly to the Escrow Officer.
5. Take steps to secure your email account. These steps include creating strong passwords, using secure WiFi, and not using free services.
6. Pay attention to how the wiring instructions are received and the e-mail address you are receiving them from. Hackers have gotten very creative by using e-mail addresses that are similar to a real e-mail, with perhaps only one letter being different or the ending having been changed, such as JaneDoe@escrow.mail instead of .com. Often times these days, wiring instructions are sent encrypted. If you are not receiving secure escrow instructions, be wary.
If you believe you have received suspicious wiring instructions, immediately notify your bank, your real estate professional, and the Escrow Company you are working with. If you have fallen victim to a scam, immediately contact the Federal Bureau of Investigation at https://www.fbi.gov/; the FBI’s IC3 at www.ic3.gov; or call 310-477-6565. The quicker you react, the more likely it is to be able to recover lost funds.