Real estate wire fraud has been on the rise. Here's some tips on how to wire money safely

In the age of rising cybersecurity threats, real estate wire fraud has become one of the fastest-growing cybercrimes in the U.S.

Real estate transactions can be particularly vulnerable to fraud attacks because they happen on a regular and recurring basis and typically use established, straight forward processes.

By many measurements, wire fraud has become more prevalent in the real estate sector in recent years, with fraudsters tricking unsuspecting homebuyers into wiring their down payments and closing costs to a fraudulent account. The red-hot real estate market seen during the pandemic created an environment in which fraudsters could target many unsuspecting first-time homebuyers, wiring higher amounts of money to buy homes at higher sale prices.

Earlier this year, the FBI’s Internet Crime Complaint Center released its 2021 Internet Crime Report, which found that in 2021, reported losses from real estate-related cybercrimes totaled $350,328,166, an increase of 64% over 2020.

With this in mind, many clients we work with these days express a concern when wiring money for their closing.

But the good news is that there is nothing inherently wrong or dangerous with wiring funds, you just have to be hypervigilant and careful to make sure the money is going to the right party.

Educational efforts by real estate professionals are helping. The number of victims of real estate-related cybercrime fell 15 percent in 2021 from the previous year, according to the FBI’s 2021 Internet Crime Report.

Let’s go over some tips and best practices for preventing wire fraud.

How to prevent falling victim to wire fraud in a real estate closing

1. Secure your devices and account and be weary of emails

One of the most reported sources of fraud has been the Business Email Compromise (BEC)/Email Account Compromise (EAC), a scheme that target businesses and individuals performing transfers of funds.

The scam, according to the FBI, “is frequently carried out when a subject compromises legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds.”

Practicing good password and security hygiene can make you less vulnerable to any cybercrime.

In 2021, the FBI’s Crime Complaint Center  received 19,954 Business Email Compromise (BEC)/ Email Account Compromise (EAC) complaints with adjusted losses of nearly $2.4 billion

It can be very easy for hackers to clone an email address of someone you have been worked with in your transaction, so be extremely wary of any information you’ve received over email before confirming it verbally with the person in question.

You should not rely on contact information or other details as a sign that the email is credible, as hackers can obtain informational in emails through phishing scams.

2. Understand in advance how you’ll be making payments at closing

Homebuyers should make a point early on to make sure they thoroughly understand the instructions for wiring funds. You should talk with your closing attorney about payment methods and how you should wire funds on closing day. You can also take the opportunity to create a contact list of trusted contacts and everyone involved in your closing.

It’s best not to share this contact list or your writing instructions in an email, as cybercriminals could access and use it. Ideally, you should never wire funds without verifying the instructions orally with two trusted partners ahead of time.

You should be suspicious of any communications regarding changes to your wiring instructions, as those changes are rare and should only come from your closing agent (again, verify any wiring instructions with your closing agent verbally before sending).

3. Don’t Send Your Financial Information Via Email

You should never send your financial information via unencrypted email, as this would allow a cybercriminal to gain access to your banking informational and withdraw money directly from it.  

Note: Cybercriminals will also use telephone calls as a way to obtain or verify a victim’s personal information or trick them into sending money. As with emails, be weary and if you suspect that the call is illegitimate, hang up immediately - do not provide any information - and contact a member of your closing to confirm.

Act fast if you fall victim to fraud

In the event that you realize you were duped into wiring money to the wrong party, time will be of the essence.

You should contact your bank as soon as possible and request a wire recall to stop the money from being transferred. They can’t always be able to stop the transfer, but it’s worth trying.

You should also file a report to the FBI’s Crime Complaint Center and your local police department. The more information you provide to law enforcement, the more likely they’ll be able to help you. You may also want to provide your bank with a copy of the police report for their records. ‍

Conclusion

Wire fraud scams are becoming more and more of a threat to people going through a real estate closing.

The good news is that there is nothing inherently dangerous about wiring money, and you can protect yourself by staying vigilant, erring on the side of caution, and working closely with your realtor and attorney to ensure that you are not led astray by a scammer.

If you need a real estate attorney to guide you through your next closing, contact Pederson Real Estate Law for a free consultation. We have over 25 years of experience working with Connecticut clients in residential real estate transactions. We serve the lower Fairfield County area, including Greenwich, Stamford, New Canaan, Westport, Darien, Wilton, and Norwalk.