In the modern digital world you need to beware of real estate wire transfer fraud when you close on a home.
Wire transfer fraud is on the rise in the real estate industry. Scammers are getting more sophisticated and have come up with a number of ways to identify a pending real estate sale and then convince the buyer to wire closing costs or the closing agent to wire the sale proceeds or disbursements to the scammer’s bank account.
It can happen to anyone and it’s getting more sophisticated as scammers can net hundreds of thousands of dollars from just one transaction.
Here’s How The Scam Works
The way the scam typically works is the scammer targets a number of parties involved in a real estate sale.
The entry point is usually an employee at a Title Company, Attorney, Real Estate or Mortgage Office, but can start with either the buyer or the seller.
The scammer phishes or hacks the email account of one or more parties and then monitors the progress of the home sale. When it comes time to close the deal, pay closing costs and disburse money the scammer will create a fake (but official looking) instruction, that appears to be from one of the parties in the transaction, to wire closing costs to an account or pay off the mortgage to a fake account or distribute the seller’s equity to a fake account.
It’s as simple as changing the account number in the pay off or disbursement instructions.
Upon receiving a payoff instruction from the closing agent the bank will make the payment as long as it is paying into a valid account. The bank has no obligation to verify that the person named in the wire instructions owns the account. The bank is simply obliged to pay the money to the account number in the instructions.
At the push of a button the proceeds from a sale can end up in a scammer’s bank account.
You can imagine the mess that this creates for everyone in the transaction.
If the mortgage payoff is wired to the scammer instead of the mortgage lender, the seller will leave the closing table with the sale proceeds but the mortgage will not be paid off and the seller will still owe the balance of the home loan.
You can be sure that there will be a great deal of finger pointing and probably expensive litigation.
How To Protect Yourself Against Wire Fraud
Here are a number of steps you can take to protect yourself and your family and friends against real estate wire fraud.
- Co-ordinate all closing activity with the closing agent and ask them to confirm how they received wiring instructions. If it is by email or the instructions were recently updated, alert them to the possibility of wire fraud.
- Before the sale closes ask to review all the closing instructions and ask the closing agent to confirm any wire transfer instructions directly by phone with the relevant party who sent the instructions.
- Closing agents should be trained to double-check all electronic wiring instructions but if they make a mistake it will be your problem. If you send the closing agent an email asking them to verify all closing instructions you will have a paper trail if anything goes wrong.
- Review all email addresses, especially if the email address changes near the closing date.
- If you have any concerns you can avoid using electronic wire transfers. Ask for your sale proceeds to be paid at closing by certified funds like a bank certified check.
- Call the receiving party immediately after a wire transfer to confirm receipt. It can take a few days for the scammer to withdraw the funds from the scam account. This gives a bank or lender time to reverse or hold the transferred funds.
- Report all wire fraud to the FBI Internet Crime Division at ic3.gov.
Your title or closing agent will have its own anti-fraud procedure. Make sure you follow that procedure and double check any instruction that will cause you to share personal information or consent to the wiring of any funds.