Preventing Wire Fraud In Your Real Estate Transaction

Brittany Read & Mike Read January 21, 2023

Fraud Prevention: Educating our clients is the first key to helping them avoid fraud. We are always working to protect you from electronic fraud in a real estate transaction.
Real estate wire fraud continues to be one of the most prevalent cybercrimes in the U.S. About 13,638 people were victims of wire fraud in the real estate and rental sector in 2020 (a 17% increase over 2019) with losses of more than $213 million ), according to FBI data.
Lurking scammers are a daily problem in the real estate industry. Protecting yourself from real estate transactions from electronic fraud by remembering these steps can help you avoid being a victim of an e-scam:
  • Stop: If you receive an email or text message with transfer instructions, do not respond. If you get a phone call with instructions to transfer, tell the caller you are hanging up to verify the information.
  • Call: To make sure you’ve received a legitimate request, call a reliable phone number you’ve used prior to communicating with the lender or deposit officer on the collateral or use a number written in your contract. DO NOT use a number in the email that was sent to you or call the number that texted you. There could be a scammer on the other side of the call, ready to trick you into diverting funds into their account.
  • Verify: After calling a trusted number to your escrow representative, speak to them and verify that there has been a change in transfer instructions.
Always reach out to your agent to help make sure you have the correct number for escrow.
Real estate transactions are an attractive target for sophisticated fraud scams. In a typical scenario, cybercriminals identify a pending sale transaction and then build a profile of the parties—including the title company, real estate agents, and the buyer and seller. They hack into one or more parties’ email account and monitor email traffic for their opportunity to strike, usually sending false wire instructions that divert deposits, closing costs and even mortgage payoff funds from their intended, lawful recipient.

In a real estate transaction, wire fraud is generally purported using one of these techniques:

  • Business E-Mail Compromise (BEC) – Targets businesses working with foreign suppliers and/or businesses regularly performing wire transfer payments.
  • E-Mail Account Compromise (EAC) – Targets individuals. These sophisticated scams are carried out by fraudsters compromising email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfer of funds.
  • Phishing/Vishing/Smishing/Pharming – Unsolicited email, text messages, and telephone calls purportedly from a legitimate company requesting personal, financial, and/or login credentials.
  • Spoofing – Contact information (phone number, email, and website) is deliberately falsified to mislead and appear to be from a legitimate source.
Implementing wire fraud risk management strategies will help members and associations minimize liability for losses due to fraudulent cyber schemes. And, insurance coverage may be available to help mitigate the damages of a cyberattack or wire fraud incident.

Recommended Practices:

  1. Educate buyers about possible scams. Many brokers are requiring a signed disclosure to acknowledge the risk of wire fraud.
  2. Include a wire fraud notice in your email signature.
  3. Use a transaction management platform or secure email to communicate with clients.
  4. Never send wire instructions (or any personal or financial information) via e-mail.
  5. Verify wire instructions with a phone number independently obtained.
  6. Use smart email practices:
    • Double-check the sender’s email addresses and call the sender if you’re unsure they actually sent the email.
    • Monitor your email account for unrecognized activity.
    • Keep your operating system and antivirus programs updated.
    • Avoid using unsecured (public) WiFi.
    • Never click suspicious attachments.
    • Use strong passwords for your email and all online accounts, and two-factor authentication when available. A strong password generally has these characteristics:
      • At least 8 characters
      • A mix of letters and numbers;
      • A mix of uppercase and lowercase letters;
      • At least one special symbol (i.e., ! @ # $).
NAR encourages all real estate licensees to know the signs of potential wire fraud and to educate their clients about these scams. Licensees should be knowledgeable about how to advise their clients if they believe they have been victimized by a wire fraud scam and use best practices like these.

If fraud occurs, advise your clients:

  1. Time is of the essence.
  2. Immediately contact their bank to issue a recall notice of the wire transfer.
  3. File a complaint with the FBI at ICgov. Filing within 24 hours, but no more than 72 hours, provides the best chance of recovery.
  4. Contact your local FBI office.

Learn More:

  • Window to the Law: How to Avoid Wire Fraud in Transactions
  • Window to the Law: Cyberscams and the Real Estate Professional

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Whether you are new to the desert market, contemplating selling your home, or are a savvy investor, The Read Group has the know-how, resources, and determination to get the job done successfully for you, Work with Read Group Real Estate now!