Residential real estate transactions involve the transfer of large sums of money. Electronic communications using emails and electronic wire transfers have aided the speed and efficiency of real estate transactions. Unfortunately, this increased reliance on electronic communication has also created more opportunities for criminals to scam homeowners.
What is Wire Fraud?
Over the last few years, wire fraud has become one of the leading sources of fraud in the residential real estate industry. Scammers are posing as mortgage and/or title insurance company employees in order to steal down payments, mortgage payoffs and proceeds from homeowners. According to the Federal Bureau of Investigation & International Law Enforcement reports, there have been over 40,000 cases of wire fraud over the last 5 years resulting in over $5 billion in financial losses.
How does it happen?
The most common form of wire fraud we are seeing is Business Email Compromise (BEC), also known as Email Account Compromise (EAC). In real estate transactions, the criminal assumes the identity of the title company or real estate agent handling the sale. The scammers will hack emails of buyers, sellers, title agents or lenders. They will then monitor the correspondence between parties, often for long periods of time, gathering information.
When the time is right, the criminal will forge the assumed identity’s email address and use specific details to the transaction qualifying their fraudulent email to appear specific and authentic.
This can be as discreet as adding a space to an email address, (example: “email@example.com” vs “bob @gmail.com”) so that to the recipient, at first glance it looks to be coming from a reliable source. Thankfully, not all these criminals are masterminds, meaning quite a few are more easily recognized as fraudulent (example: “firstname.lastname@example.org” vs “email@example.com”). Also, misspelled words or poor grammar can be a flag that something is not right and should be questioned.
Now posed as a credible party to the transaction, the scammers will intercept and/or modify an email to the buyer/seller. In this message, the crooks will deliver fraudulent wiring instructions directing funds be wired to their bank account, not the title agency’s or bank’s legitimate account. Again, this could mean a completely new wiring number, or it could be just a single number changed.
Unlike credit card fraud, when a wire transfer is stolen, the money is gone. In most cases, there is no way for authorities or financial institutions to recover any of the stolen funds. This type of fraud can impact anyone who is buying or selling a home.
It is important to be vigilant and take proper steps to protect funds from these cyber criminals. Many local title companies, such as Minnetonka Title, have discontinued the service of wiring seller proceeds. Lenders are commonly picking up the phone to verbally verify wiring instructions with the intended recipients, despite the potential temporary inconvenience of the client.
Here is a list of a few things you can do to protect yourself against these criminal acts:
- Create strong passwords & change them often. (Do not use your pet’s name or street address)
- Always verify wire instructions over the phone with a verified employee of the title company before sending a wire. Use the phone number from the title company’s website or business card.
- Use encryption whenever possible
- Watch for grammatical errors, misspellings or other oddities in email correspondences that can tip you off that email is fraudulent.
- Be suspicious of requests for secrecy or pressure to take action quickly.
- Verify immediately with the title company or agent that the funds were received by the intended recipient.
- Share personal information over email.
- Click on links or open an email from an unknown source.
- Rely solely on electronic communication.
- Always verify with a phone call, or in person whenever possible.
- Use public Wi-Fi to communicate.
These days it is nearly impossible to conduct business without some form of electronic communication. Remember to always be vigilant and aware of the threats out there. It’s 100% worth the time to follow the proactive steps such as those listed above to ensure you do not become the next victim of wire fraud.
Contact Dan Fazendin or Brenda Dombeck at Minnetonka Title to ask questions and receive more information about wire fraud and home title services.
Contact Minnetonka Title:
952 473 4331 | Info@MinnetonkaTitle.com