Picture this: you’ve worked hard to save up enough money to buy your first home, but just as you’re about to close on the house, thieves swoop in, seemingly from nowhere, and whisk away the cash you’ve set aside for closing.
Recently, this nightmare scenario has turned into reality for many home buyers across Florida, as well as the entire United States. Duped by hackers into sending their closing money to a random account, the buyers end up not being able to purchase their dream home. How can this happen and what steps can you take to protect yourself?
The truth is, it’s easier than you think to become a victim of real estate closing wire fraud. Here’s how it happens and how you can protect yourself.
What Is Real Estate Wire Fraud?
When you buy a home, you need to pay closing costs, or settlement fees, as part of the purchase. Although the exact amount of the fees varies, they are often between three and five percent of the price of a home. If you’re buying a $300,200 home (the median price for a new home in the US, as of August 2017), your closing costs might be between $9,000 and $15,000.
Ten thousand dollars, sometimes even tens or hundreds of thousands of dollars, in one transaction is a lot for a thief to get their hands on, making it an especially appealing target. Real estate wire fraud occurs when a thief or hacker somehow convinces you, the buyer, to send your closing costs or even your “cash to close” their way, rather than bringing the money to closing or transferring it to a legitimate account.
If you’re a victim of wire fraud, it’s often difficult, if not impossible, to get your money back once a hacker gets it. There are countless tales of people who were about to buy their ideal homes, only to lose out on their money and their sale.
How Wire Fraud Scams Work
How on earth do wire transfer scams work? Aren’t today’s homebuyers, especially digital-savvy Millennials, smart enough to know what a scam looks like from a mile away?
While some people can avoid being tricked by hackers, others aren’t so fortunate. What makes wire fraud so effective is that the hackers often break into the email accounts of the buyer’s agent or title company.
Today’s thieves are particularly sophisticated. They aren’t sending out emails with words spelled wrong or nonsensical messaging.
Instead, today’s hackers are studying their marks closely. They learn the language, as it were, and they learn how to imitate the tone and style of an agent when emailing their victims. Once inside an agent’s email account, thieves can read previous emails sent between agent and buyers and agent and sellers and get to know who’s involved in the transaction. Getting this information helps them come across as even more convincing when they email their victims.
One of the more common types of wire fraud takes the following form – a hacker breaks into an agent’s email account. After learning the names of the people involved in an upcoming sale, the thief sends an email to the buyer, letting them know about a last-minute change of plans for the closing costs. Suddenly the thief tells them to wire the money to a new account.
Of course, that new account has nothing to do with the real estate transaction. Once the money hits the account, the hacker can take it, and the victim can do little or nothing to get it back.
How to Spot Wire Fraud
The good news is that real estate wire fraud is pretty easy to spot if you know what to look for. You want to be on the defensive, double checking that everything is what it claims to be so that you don’t end up getting robbed.
When it comes to your money and your future, you can never be too careful. If anything feels off or suspicious about a message you’ve received from your real estate agent or someone supposedly connected to your agent, don’t do anything until you’ve gotten in contact with your agent in person or over the phone.
Common Wire Fraud Red Flags
Does anything seem fishy about a message you’ve received from an agent lately? Keep an eye out for these red flags:
- An email message with new transfer instructions. Receiving a message with “new” directions, especially at the last minute, with no warning from your agent, is perhaps the most obvious red flag of them all. If you get this message, you have to wonder why on earth your agent would change the rules so late in the game.
- A message from someone you’ve never spoken with or met. If you receive an email with instructions from someone you’ve never heard of, you are right to feel suspicious. Why is this person only making themselves known now? It could very well be a hacker trying to steal your money.
- You get an email from your agent, from a different email address. If your agent starts emailing you from an entirely different address, you have to ask why. In some cases, the email might come from altogether different looking address. In other cases, the hacker might try to make the address look like your agent’s real address but with one small change or spelling mistake.
- The email message is missing its usual warnings or signature. Some agents and title companies include warnings and disclaimers in every email message they send, cautioning against emailing private information or cautioning you about the potential for wire fraud. In fact, those warnings are recommended by the American Land Title Association to cut down on cases of fraud. If you suddenly receive a message from your agent that doesn’t have that warning, you have the right to be suspicious. You also want to be wary of any message you get that doesn’t contain the agent’s usual signature or sign-off.
- The email message asks you for specific personal information. Anytime you get an email asking you to verify an account number, or for some other form of private data, you need to ask yourself why you’re getting that email and who it is coming from.
- The message asks you to click a link to go to a form. Never click links in suspicious email messages and be wary of them even if they come in what seems to be legitimate messages from your agent. Those links might go to fake sites set up just to take your info and money.
- There’s a mysterious attachment. You also want to be extra cautious about opening an attachment sent with an email, especially if your agent or the title company didn’t mention sending one. The attachment could have a virus or malware on it, making it easy for thieves to get your information and steal your money or identity.
- The name on the recipient account is different. Another sign that you’re about to be a potential victim of wire fraud is if the name on the account you’re told to send the money to is different from the name of the company who’s supposed to receive the money.
- The company you’re working with doesn’t use email encryption or regularly sends you financial information over email. While many real estate agents and title companies flat out won’t use email to communicate private information with you, some aren’t so diligent. Take the case of a couple in Colorado who ended up losing nearly $300,000, all of their life savings, in a wire transfer scam. Before the fraud, the company the couple was working with regularly used email and sent out sensitive information. Hackers were able to break into their email accounts and trick the couple into wiring their closing costs to a fraudulent account.
Protect Yourself From Real Estate Wire Fraud
Knowing what red flags to look out for is just the first step when it comes to protecting yourself from real estate wire transfer scams. Knowing what actions to take if you suspect that a hacker is trying to take advantage is also essential.
Your Wire Fraud Protection Checklist
- ALWAYS verbally verify the closing instructions with your agent. Check with your real estate agent or the settlement agent before the closing process begins to verify what how the process will happen and how you’ll be expected to pay. Before completing any wire transaction, call immediately before to verbally confirm that you have the correct account numbers and there has been no tampering with your data.
- Ask how the agent prefers to communicate. If your agent frequently calls you, but you suddenly uses email for a topic discussing sensitive information, you have every right and reason to suspect that something’s up.
- Be smart about how you use email. In this day and age, email is essential. There’s nothing wrong with communicating via email, if you are smart about the information you are sending. Never send confidential or personal information via email and remember to confirm all important instructions with verbal verification! Even if you don’t end up being the victim of wire fraud, you don’t want your bank account information or your social security number floating around insecure.
- Say “no” to free Wi-Fi. It’s so convenient to have a Wi-Fi connection pretty much wherever you go. But sometimes, that free Wi-Fi is a way for hackers to get access to your private data and accounts. Unless the Wi-Fi connection is password protected, it’s better to stay off of it.
- Use complex passwords. Everyone should know by now that passwords like “password” or “pass1234” aren’t the best options to choose. Use a mix of letters, numbers and symbols in your password. Ask your real estate agent what his or her password policy is and if he or she changes it often. Easy-to-guess passwords put you all at an increased risk for being victims of wire fraud or another scam.
- Don’t open attachments or click on strange links. Or, always use a virus scanner to check any attachments you receive, especially if you are unsure what the attachment is. Links that go to seemingly random or incorrect URLs should not be clicked either.
- Always look for the “S.” If you are going to put in any personal information online, make sure that the site you are using has a security certificate. An “s” at the end of HTTP (HTTPS://) in the site’s URL lets you know that the link is protected.
- Frequently monitor the progress of your wire transfer for proper completion. Wire transfers can take time to complete, so it is vital to steadily keep track of where the money is sent and when the transaction is complete. If the money does go to the wrong place, the sooner you take action to try to recover the funds, the better chance you have of getting them back.
What to Do If You Think You’re a Victim of a Wire Fraud Scam
Although you tend to hear all about people who lost hundreds of thousands of dollars due to wire fraud with no way of getting their money back, the truth is that the faster you take action afterward, the more likely you are to get some money back.
For example, if you realize that the account you were told to transfer money to was a false one, your bank might be able to recall the money, but only if you move quickly. Whether your bank can get the money back depends on whether or not the receiving bank has accepted it and whether there’s a cancellation agreement in place between the two financial institutions or not.
Whether you get your money back or not, you also want to report any incidences of wire fraud to the right authorities. Those authorities include the FBI, which contains the Internet Crime Complaint Center, the Federal Trade Commission (FTC) and your local police force.
While reporting the wire fraud to the right authorities might not result in any action right away, it does help law enforcement to put together a case and begin to understand the patterns or methods a hacker might use to get private information and steal more victims’ hard-earned money. Even if you do fall victim to wire fraud, your quick action is vital in preventing it from happening to other innocent homebuyers!
Work With a Title Company You Can Trust
When you’re buying a house, it’s essential that every person you work with be on the same page as you and have your best interests at heart throughout the entire closing experience. Title Partners of South Florida is fully committed to keeping your private information exactly that — private. Our company uses the best practices laid out by the American Land Title Association (ALTA) and follows the rules created by the Consumer Financial Protection Bureau (CFPB), both with the goal of keeping your information safe and secure.
We hope this article helps to save as many potential victims as possible. We also hope to earn your trust and be a part of one of the most important transactions of your life – the purchase or sale of your home.