Over the years I’ve written numerous articles about real estate fraud, how to recognize it, how to avoid it, and what to do if you’ve been victimized. Because fraud never sleeps – it just morphs into different forms to become more adept at separating you from your money, your home, or your dreams. Last year an estimated 21 million Americans were victims of one type of fraud or another – think FTX, Theranos, Bernie Madoff, Wirecard. Those were frauds on a massive scale involving thousands of individuals and billions of dollars.
But there’s a more insidious type of fraud lurking closer to home, in fact right in your own home. According to a recent report, over the past three years 1 in 20 people who bought or sold a home have been a victim of some form of real estate fraud. The most prevalent, and fastest growing, segment of this scam is the theft of your down payment or proceeds moneys through fraudulent wire transfer schemes.
The wire fraud schemes currently in vogue involve fraudsters who have become increasingly adept at leveraging public records, breaching broker and title company systems, and posing as someone involved in your transaction to steal your money without benefit of a gun in a dark alley. It’s ‘one of the fastest growing cybercrime environments we’ve ever seen’, according to the CEO of CertifiD, a leading provider of wire fraud detection software. Last year the average loss incurred by victims was $70,000 and cost a record $446.1 million in real estate transactions, according to the FBI. And the crime is only accelerating as scam artists become more sophisticated. You’re no longer dealing with a Nigerian Prince or that long lost relative who won the Irish lottery.
Let’s say you’re in the process of buying a home. Days prior to close you’ll typically receive an email, text, or phone call from your title company advising you that you’ll be receiving instruction on where to wire your funds to close. The next day or so you’ll receive an email purporting to be from the title company, identical in (almost) every way to the legitimate one you received before, giving you wiring instructions for your bank.
Except it’s not. Fraudsters set up fake websites that appear similar to the title firm or lender you’re working with, making it seem like the real deal. Scammers use spoofing tactics to make phone numbers, websites and email addresses appear familiar. But in these cases, one number or letter is often off — an easy thing to miss at first glance. But it’s a fraud and you’ve just wired your closing funds to who knows who and who knows where? If your bank is on top of things they may be able to flag the ‘wire to’ address as suspicious and not send your funds, but don’t count on it. You may be able to save your transaction IF you have sufficient resources to write another check, but all too often your housing purchase will fall apart and your shot at the American Dream will be derailed.
The same can happen in reverse if you’re the seller of a property and the title company receives fraudulent information on where to wire the proceeds from your sale. The title company may be required to make you whole, but it will inevitably cause delays and confusion, and if you’re relying on one sale to proceed with your next purchase, this will still put the onus to perform on you.
From CertifiD, ‘You have to be on high alert with every email that you get from your real estate agents, you have to be on high alert with every communication they get from your title company, because at any point, somebody’s communication could be compromised or broken down, and you could start receiving emails that look like they’re coming from one of those trusted parties when they’re not’. In terms of convenience and time savings, we’ve come a long way from the days of going to your bank and getting a cashier’s check to trot down to your title company to close escrow on your new home. But these technological advances bring their own challenges, and these scam artists always seem to stay a step ahead.
I can tell you that our Riverside County District Attorney’s office has been very proactive in responding to real estate fraud, but the key term there is ‘responding to’. They can prosecute the bad actors only after a crime has occurred, assuming the perpetrator is within their district, or even within our country. That’s not often the case. So as with most of these issues, it falls to you as the consumer to be aware and beware of becoming a victim. Don’t just rely on electronic communication with your Realtor, your escrow company, or your title office. Get an email? Call to verify the information, repeat the numbers for the wire transfer, send a separate verification email to your title officer and agent, don’t just hit reply to the one you’ve received – it could just direct you back to the scam artist who is sitting there waiting for your money.
Above all, we’ll repeat the time worn advice that we should have heeded when our parents told us the first hundred times – “If it seems too good to be true…” You know the rest. Or as Ronald Reagan advised us “Trust…but verify”.