Wire Fraud: Understand and Avoid the Threat!

Imagine, you have worked hard and saved for a large down payment, you have found the perfect home, and now you are days away from closing. The transaction has progressed smoothly, and now you have been contacted by email from someone who appears to be your real estate agent to wire your closing funds to the attorney’s office for settlement. Because your real estate agent has guided you throughout the home buying process, and you have trusted in their guidance, you wire the funds just as they have advised in the email without question. What could go wrong? Wire Fraud! You could lose all of your hard earned down payment by inadvertently wiring your funds to a scammer.

You may be thinking this could never happen to you, but on the contrary, wire fraud in real estate transactions is on the rise, and you could be a scammer’s next target. According to the Washington Post, the FBI reported that in 2017 approximately $1 billion was “diverted or attempted to be diverted” from real estate purchase transactions and wired to fraudulent accounts. This amount is up from 2016, where the FBI reported approximately $19 million in losses. Home buyers are not the only ones being targeted in real estate transactions. Sellers, realtors and closing attorneys are also regularly targeted by wire fraud scams. Because of this, it is imperative to understand the potential threat and follow steps to minimize the threat of becoming a victim of wire fraud.

What to Look For

Although there are many variations, let’s examine how the scam typically operates:

  • Wire fraud scams begin with the scammer hacking into the email account of one or more parties involved in the real estate transaction.
  • Having access to the email account, the scammer gathers important information in regards to the transaction such as the identity and contact information of all the parties involved, the closing date and time, and the amount of the funds to be wired.
  • Posing as the real estate agent, lender, or even the closing attorney, the scammer sends an email to the buyer requesting the party send their closing funds using the wiring instructions provided in the email. Most of the time, the scammer either requests the victim to wire the funds to a bank located outside of the country or to a bank located in the United States where the scammer then immediately wires the funds to another account located outside the country.
  • Once the funds are sent to a foreign account, they are generally beyond the reach of the banks or FBI, and unrecoverable by the victim forever.

How to Avoid the Scam

Because scammers are always tweaking and evolving their scams, it is hard to know exactly what to look for in order to avoid being scammed.

First, as a buyer or seller, minimize the risk of becoming a victim of wire fraud by always be vigilant about who is sending you wiring instructions. Generally, you should only use wiring instructions that you have received directly from the closing attorney. Most closing attorneys will only send wiring instructions through secure email or hand delivery. There will, however, be sometimes when a real estate agent or lender may provide you with the closing attorney’s wiring instructions. If this happens you should ALWAYS verbally verify those wiring instructions with the closing attorney directly.

Second, If you receive wiring instructions via email, always check the email address. Often times, the scammer’s email account will be a close variation or nearly identical to that party’s email. For instance, notice how easy it is to misread “Arnerica” since the “r” and the “n” can look like an “m” if you’re not paying close attention. Many times, the scammers email address will be different from the actual party’s email address by only one or two letters.

Third, look for red flags in your emails. Emails with uncommon words or phrases, spelling errors, poor grammar, random politeness such as statements like “kindly confirm receipt”, and unusual questions should always raise an eyebrow. Additionally, beware of emails which change the wiring instructions from ones you have already received.

Fourth, realize that scammers may use means other than email. Some scammers are actually calling victims to give or change wiring instructions. Again remember that no matter who you receive the wiring instructions from, you should ALWAYS call the closing attorney at a number you know is valid - not at the number provided in the potentially fraudulent email or phone call - to verbally verify the wiring instructions.

Finally, it is important to remember that wire fraud is an evolving scam and that scammers are always finding new ways to perpetrate the crime. Criminals will get more and more sophisticated as people learn how to avoid scams.

If you believe you have become the victim of wire fraud, it is important for you to contact the bank and law enforcement immediately.

Published by Cynthia Pela on April 10, 2018.