In 2022, the real estate industry experienced staggering losses of $400 million due to wire fraud, contributing to $10 billion in cyber fraud losses across various sectors. Wire fraud in real estate transactions has become a significant concern for buyers and sellers. To safeguard your investment and protect against potential financial losses, it’s crucial to understand the various types of real estate fraud and take proactive measures to prevent falling victim to these scams.
Types of Real Estate Fraud
1. Seller Impersonation
One common form of real estate fraud is seller impersonation. In this scheme, fraudsters pose as legitimate property sellers, often communicating with buyers through email or other electronic means. Real estate agents should adopt best practices to combat this type of fraud, such as meeting clients in person and verifying their identification. Additionally, innovative solutions like Verus Title‘s automated identification verification against selfies and fake IDs can provide an extra layer of security.
2. Buyer Phishing
Buyer phishing involves cybercriminals sending deceptive emails to home buyers or real estate agents, often masquerading as their title company. These emails may appear convincing, using similar domain names and stolen logins to trick recipients into wiring funds to the wrong account. To protect against buyer phishing, it’s essential to be cautious and verify wire instructions through secure channels. Companies like Verus Title prioritize secure communication and do not send wire instructions via unsecured email.
3. Mortgage Payoff Fraud
Fraudsters also target mortgage payoff transactions, often using faxes to communicate. While faxes are considered more secure than email, they are not immune to fraud. Verus Title employs a robust verification process to mitigate this risk by cross-referencing secure payoff instructions databases and verbally confirming details.
Protecting Yourself Against Wire Fraud in Real Estate
1. Be Vigilant
The first rule of defense against wire fraud is vigilance. Never solely rely on email instructions for wiring funds. Always initiate a phone call to a known number to confirm wire instructions. Do not use phone numbers or wire instructions in emails, as they could be fraudulent.
2. Be Suspicious
Be on the lookout for red flags that may indicate potential fraud. Title companies typically do not change wire instructions at the last minute. Be cautious of emails with unusual language or slight misspellings in the email address or domain. Beware of emails pressuring you to send funds quickly, especially around the holidays. Advise clients to confirm the title company’s receipt of funds three to five hours after sending.
3. Practice Good Cyber Health
By following good cyber hygiene practices, you can avoid becoming a conduit for business email compromise. Refrain from using free email services like Hotmail or Yahoo for sensitive transactions. Activate two-factor authentication on all your accounts, including personal email and any real estate transaction platforms you use, such as the Qualia platform.
What to Do If You’re a Victim of Wire Fraud
If you or your client falls victim to wire fraud, it’s crucial to act swiftly to maximize the chances of recovering the stolen funds:
1. Call the Bank: Immediately contact your bank to initiate a wire recall. The sooner you report the fraudulent activity, the better your chance of stopping the transfer.
2. File an FBI Report: Report the incident to the Internet Crime Complaint Center (IC3) at ic3.gov. The FBI investigates cybercrimes, and providing them with information can aid in tracking down the culprits.
3. Report to Local Law Enforcement: Contact your local law enforcement agency and provide them with details of the wire fraud incident. Local authorities may be able to assist in the investigation.
Wire fraud in real estate transactions is a serious threat that can result in substantial financial losses. By being vigilant, suspicious of unusual communications, and practicing good cyber health, you can reduce the risk of falling victim to these scams. In the unfortunate event of wire fraud, immediate action is crucial to increase the chances of recovering the stolen funds. Protecting your investment in real estate requires diligence, caution, and awareness of the potential risks of wire fraud.