Money Wire Fraud in Real Estate Transactions
From embezzlement at local service organizations, to stolen masses of credit card information, to the grand-scale Ponzi scheme of Bernie Madoff, scams have been in existence since the beginning of commerce. And while the majority of people are truly good and honest, it only takes a small, devious minority to wreak havoc on the unwary.
The large sums of money changing hands in a real estate transaction have long made the industry a target of opportunistic scammers. Often the crimes involved unscrupulous affiliates within the business (such as real estate agents/brokers, mortgage lenders, title companies, etc). Occasionally, the thefts would also involve unaffiliated straw buyers or fake sellers. Most of these cases however, although complex, they were relatively low tech crimes by local individuals who were eventually caught and prosecuted.
Recently, an alarming, high tech scam has surfaced and of which consumers should very wary. It involves the hacking the email accounts of real estate agents, lenders, or title companies. The hacks are overseas criminals who gain access to an email account and then essentially monitor the correspondence to determine the specific details of the transaction (buyer/seller names, settlement date, sale/mortgage amount, etc.).
The crook will then send an email to the buyer the day before settlement posing as the title company and provide bogus wiring instructions to which the buyer should send the money needed for closing (these days most title companies do not accept checks for large sums and require funds to be wired prior to settlement). Often the crook actually waits until he sees a bona fide email from the title company with wiring instructions to the buyer. Then the hack sends a follow up email to the buyer with “corrected” instructions.
It is not just Buyers that have been targeted, there are other versions of this scam including the wiring of the Sellers proceeds and mortgage payoffs. But they essentially rely on the same elements; the hacking of an email account, monitoring of the correspondence, and a perfectly timed email to the party who is expecting to have to wire funds.
Although this scam is pretty high tech and the thieves have a very good understanding of how real transactions work, the best protections for consumers is actually quite simple:
1. Deal with brokers, lenders, and title companies who are well established and that you recognize and trust.
2. When wiring money, whether the recipient is the title company or your bank, call or go in person to verify the wiring instructions before sending the money.
3. If any suspicious emails come across or “corrected” wiring instructions, verify the legitimacy of the email by calling your agent or the title company directly.
These simple steps can literally prevent thousands of dollars being sent to a crook’s offshore account. Recovering that money is nearly impossible and the real estate transaction cannot settle if the necessary funds do not arrive at their legitimate destination.
Think this can’t happen? Unfortunately, this crime has occurred locally in Southeastern PA. All parties to a real estate transaction must be vigilant and protect their email accounts, private information and verify wiring instructions. Awareness is a crucial first step.
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