Real Estate Wire Transfer Fraud Gains Momentum

  • A new type of wire fraud is beginning to target and impact homebuyers
  • Real estate transactions in today’s world often involve the wiring or electronic funds transfer (EFT) of money to complete a deal.
  • Buyers are being tricked into wiring their entire down payment on the day of closing to a fraudulent offshore account, often by cyber criminals who have spoofed or hacked their realtor or title company’s professional email account.
  • The losses from these wire scams are typically not insured or reimbursed by the bank because the wire transfer goes overseas.
  • Victims of these scams have sometimes lost up to six-figure sums and have had to cancel plans to buy their dream homes.
  • The California Department of Real Estate (DRE) has issued a consumer alert for real estate wire fraud.
  • This article will give you 5 tips on how to protect yourself or your client during your next real estate transaction.

Imagine This Scenario

You’re about to buy the home of your dreams when you receive an email from your realtor or title company saying there has been a change of plans. The email explains that you need to wire your down payment by tomorrow morning to a bank account belonging to the seller. Eager to close, and to trust the legitimacy of this email, you wire over your hard-earned down payment to the bank account requested. The next morning you decide to call your realtor and discuss what is next only to find out they never sent any such email. Your down payment is now gone, and you’ve just been the victim of an increasingly common form of financial fraud – real estate wire transfer fraud. 

Why Wire Transfers Are A Problem

The above story may sound crazy, but it is entirely accurate. According to the National Credit Union Administration in 2016, the number of fraudulent wire transfer scams reported by title companies and real estate agents increased by 480%. These numbers are alarming and indicate a real crisis that is impacting thousands of American homebuyers. While a typical wire fraud may only net a few hundred dollars, real estate wire fraud can net a cybercriminal anywhere from a few thousand dollars to hundreds of thousands of dollars. This can wipe out the would-be homeowner’s bank accounts and create lasting financial hardships.

How the Scam Works

  • Hackers will typically compromise a real estate agent or title company’s email server and search for upcoming closings.
  • The hacker will then email the buyer with legitimate-looking wire transfer instructions (sometimes as soon as the day before closing) requesting that the down payment is transferred electronically to a different account.
  • Once that money is transferred, it is GONE for GOOD. Banks, financial institutions, and the government typically cannot ensure this type of transfer because the accounts are offshore.

What makes this even more difficult is how skilled hackers are becoming. Often, they will use authentic-looking company logos, language, and personal information designed to make you feel comfortable.

  • Email is a commonly used method for transfer of information and documents in a real estate transaction – making it even more difficult for targets to spot.

What You Can Do To Avoid It

  1. Be aware – as a homebuyer be mindful that you could be a target for scammers. Look for potential red flags which include a sudden change of plans, misspellings, poor grammar, an increased sense of urgency, and emails sent outside of regular business hours.
  2. Use alternatives whenever possible – Instead of using electronic wire transfers, use cashiers checks and get a receipt. With smaller transactions, you may be able to use personal checks or a credit card and obtain a receipt, which will give you a proof of purchase.
  3. Obtain Numbers –  Get the phone numbers and account numbers of the real estate agents and escrow-holders at the beginning of the real estate transaction, and be sure to use those throughout the transaction. This provides you absolute proof you are transferring money to the right accounts.
  4. Call first – Even as legitimate as they may seem, never act on an email request to transfer funds electronically without verification. If your agent requests that you need to transfer money electronically this way, always call the number provided at the beginning of the transaction and verify the email request to transfer funds. Even better, transfer the money in person with a cashiers check. This way you can see directly who you are sending the money to.
  5. Keep it confidential – Never offer any sensitive personal information such as social security numbers, credit card numbers, bank account numbers, or financial details via email or text message. ALWAYS and ONLY enter this type of information on an encrypted website or give the information in person.

Taken directly from the DRE, here’s what you can do if you or someone you know has been a victim of real estate wire fraud.

If you (or your clients) are victimized, it is critical that you or your client contact your depository institution and the Federal Bureau of Investigations (FBI) immediately to have a chance at halting the criminal transfer. File a report with the FBI by calling a local FBI office or reporting online at FBI Internet Crime Complaint Center.  Their website is: bec.ic3.gov

Curtis Gabhart and Gabhart Investments, Inc – 2018 All Rights Reserved
The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of Gabhart Investments, Inc. The material contained in articles that appear on gabhartinvestments.com is not intended to provide legal, tax or other professional advice or to substitute for the proper professional advice and/or commercial real estate due diligence. We urge you to consult a licensed real estate broker, attorney, tax professional or other appropriate professionals before taking any action in regard to matters discussed in any article or posting. The posting of an article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

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Gabhart Investments, Inc, one of the top real estate companies in San Diego. We do residential real estate, commercial real estate, and manage a syndication of private investors; specializing in acquiring and renovating single & multi-family properties.

We have done over $250 million in real estate transactions, have been featured on TLC‘s Flip This House, won several awards with the San Diego Business Journal, and have the distinctive CCIM Designation (Certified Commercial Investment Member).

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