As financial crimes go, wire fraud during real estate closings is probably the most despicable. Recently, a Colorado couple lost $272,000 in proceeds from the sale of their home that they planned to use to buy their new home. They not only lost the money, but the new home as well.
According to the FBI’s Internet Crime Complaint Center, complaints about wire fraud scams jumped 480 percent in 2016. The actual figure is believed to be much higher since crimes are not always reported. Here are three steps you can take to prevent becoming a victim.
Understand How It Happens
Wire fraud happens when the culprit knows when the buyers are expected to close on their home. They send the buyers a wire request, masquerading as the title or closing company. The victims then wire their down-payment to the thief’s account, only to find out later that the closing agent never received the funds. Meanwhile, the authorities are often helpless to stop wire fraud due to the complexity of the crime and the fact that the fraudster could be anywhere.
Several factors increase the risk for wire fraud, but one of the biggest is sending personal information through non-secure email, since email is relatively easy to hack. In some cases, the hacker will hack into the buyer’s email and find out when they expect to close. Fraudsters will even hack into the email accounts of real estate agents and lenders and find which transactions are about to close.
To reduce your risk, don’t send personal information like social security numbers and bank account numbers by email. Also, don’t open unexpected links or attachments, which hackers often use to collect more information from you. When communicating with your title company, use only encrypted email. This can be done by having the escrow officer send an encrypted email to you and then responding to it. This way, your email will be automatically encrypted as well.
Look for Red Flags
Wire fraud culprits will go through great lengths to disguise themselves. But there are often clues that something’s not right. Occasionally, someone may send emails from several fake accounts to try to collect more information about you, even going so far as to use your lender’s logo and address.
When you receive a request for a wire transfer, pay close attention to the email header and contents. A fraudster may use an email address that is very similar to your lender or your title company, but it may be slightly off. Check to see if the name of the bank is correct. Also, be aware of any changes in instructions, since changes are rare.
Cover Your You-Know-What
If you receive an email that asks you to send money for the closing, call the loan officer or title company to confirm that they sent it. Ask them to recite the routing number and account number back to you to see if they match.
Another option that may be available is to have the wire instructions sent to you by overnight mail. A third option is to pick up a physical paper copy of the wire instructions from the closing office. After the wire transfer, call the lender or title company to confirm they received it.
Wire fraud may not be 100% preventable. But by being aware of the risks and taking the proper steps, you can decrease the risk of it happening to you.
About the Author
Shannon is a seasoned innovator and trusted leader in the Mortgage and Settlement Services industry. Prior to his tenure as Chief Operating Officer at reQuire, Shannon held senior executive positions at WFG National Title Company and LandAmerica Financial Group.