Buying a home is stressful enough without also having to worry about potential fraud. Unfortunately, real estate fraud is surging. According to Realtor magazine, scams targeting the industry rose 1,100% from 2015 to 2017, resulting in losses of more than $1.6 billion. Home closing wire fraud should be of particular concern for prospective homebuyers. When schemes are successful, criminals can make off with buyers’ hard-earned down payments — several hundred thousand dollars’ worth in some cases. Here’s how to avoid losing the home of your dreams and the money with which to buy it.
Home closing wire fraud involves hackers who typically use real estate agents’ email accounts to trick homebuyers into wiring money. Perpetrators send phishing messages containing links that, if clicked on, install malware. The hackers then infiltrate the agent’s email account and send messages to clients who are about to close on a home. Emails instruct buyers to wire closing funds to a specified account. Once the money is wired, the crooks quickly liquidate it. In most cases, the wired money isn’t recoverable.
Hackers also may target the email accounts of title companies, lenders, attorneys and sellers, and the process is the same. The criminals monitor emails to learn details about potential homebuyers and deals in progress and to learn how to create messages that will look and sound like they’re coming from a buyer’s agent or other real estate professional.
Preventing home closing wire fraud must be a group effort. Homebuyers need to scrutinize emails they receive from their agents, attorneys and title companies. And those professionals need to ensure their accounts aren’t hacked in the first place.
Prospective buyers should ask their agents whether they’re aware of wire fraud scams and how they protect against them. For example, does the real estate company train agents to spot fraudulent emails? What type of firewall, antivirus and antimalware software does it use?
Many companies go to great lengths to prevent this type of fraud. They may, for example:
- Prohibit their agents from emailing wiring instructions,
- Require buyers to pay closing costs with a cashier’s check rather than a wire transfer, and
- Employ cloud-based systems to screen emails and provide an extra layer of protection for confidential information.
At the very least, homebuyers should call their agents (or other real estate industry senders) to confirm the legitimacy of any message containing fund transfer or other potentially fraudulent instructions.
Home purchases involve large sums, which makes them a natural target for fraudsters. Awareness of fraud schemes is the first step to avoid becoming a victim of them. For assistance with fraud issues contact Ashley Lee, CPA, CFE at firstname.lastname@example.org. Contact Larry Davidson, CPA at email@example.com for real estate business related questions.