Wire fraud is rampant in the settlement industry, and the latest housing boom has made the industry particularly vulnerable. Large sums of money are wired by multiple parties to a transaction, including anxious buyers whose settlement may already be delayed due to COVID-related issues, and settlement and lending industry professionals who have much more than the typical workload. These additional stressors may account for lapses in judgment.
It doesn't help that the criminals committing wire fraud are getting smarter. Years back, fraudulent emails containing altered wiring instructions were written in poorly constructed English, and sent far too early in the settlement process to fool purchasers. Nowadays, the perpetrators are highly sophisticated – their knowledge of the settlement process rises to such a level that it is easy to fool even those seasoned buyers, sellers, and title professionals.
The fraud is typically perpetrated on the buyer or the seller, and here's how it is done:
Fraud on the buyer. The perpetrator hacks into the email messages of a party to a real estate transaction and discovers an upcoming settlement. The perpetrator digs through emails and documents to find out how much money is owed for settlement as well as the projected closing date. The fraudster creates a fake email address that closely resembles an email address of a title or escrow representative that with whom the buyer has been communicating. For example, if the buyer were corresponding with “titlerep@escrow.com,” the fraudster would create and correspond through the email address “titlerep@escr0w.com”. Notice the difference?
The perpetrator would then send fraudulent wiring instructions to the buyer via email, asking for them to wire funds in a specified amount for settlement. If the buyer was not cautious, the buyer would comply with the request, and wire the funds to the fraudster’s account. In many cases, the buyer would never see the money again.
Fraud on the seller. Alternatively, the fraud may be perpetrated upon the seller to a transaction. After the seller has signed documents for settlement, the fraudster would create an email address that closely resembles the seller’s email address, and email the title or escrow company requesting that the seller’s proceeds be directed to a different account than the account that the seller provided at the closing table. Because this type of fraud involves an attempt to trick the title professional handling the funds, it is much more easily spotted: most professionals in the title industry have been trained extensively on spotting this type of fraud and can detect and defect it.
Follow these best practices to prevent becoming a victim of wire fraud:
1.) Call. Before wiring any funds, call your escrow company and verify the figures on the wiring instructions.
2.) Check. Always check email addresses for irregularities. Recall that most wire fraud stems from a person creating an email address that looks similar to one with which a buyer is familiar. When replying to emails, use “forward” instead of “reply.” Typing in an email address you trust makes you less susceptible to accidentally replying to a spoofed email.
3.) Beware. Be suspicious of any changes to wiring instructions.
4.) Secure. Secure your devices that you are using to communicate with your real estate agent, lender and title company. Change passwords regularly, and use secure networks when possible. You will be more susceptible to fraud when using Starbucks’ internet than the secure wifi at your personal residence.
5.) Consider using cashier’s checks instead of wiring funds.
For more tips on how to prevent wire fraud, visit https://stopwirefraud.org/.
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