Avoiding fraud in homebuying transactions

Real estate transactions present a lucrative opportunity for cybercriminals to steal significant sums of money.

These thefts typically occur through wire fraud in which a homebuyer, or other party, is tricked into wiring money into the wrong account. In many cases these funds are irretrievable.

In a case in New Jersey, for example, an employee for a title agency failed to follow company protocol and mistakenly wired funds to a fraudulent account.

The title agency filed a claim against their professional liability policy, but the insurance company denied coverage under an exclusion for wire fraud. The title company lost in litigation and was ultimately out hundreds of thousands of dollars.

But professional real estate firms aren’t the only ones at risk. Homebuyers can also lose money when they’re convinced, through phishing emails and other schemes, to wire money to the wrong party.

Hackers are using a strategy called “business email compromise” to infiltrate corporate accounts and send fake wire requests. These can come in the form of an invoice, or in the case of real estate, fraudulent transaction instructions.

The attack starts with a vast number of phishing emails sent to real estate service players such as agents, title agencies, mortgage lenders, etc.
The goal is to trick an employee into logging into what looks like their company’s own secure website or project portal. That login information gives hackers inside access into confidential information like client email addresses and scheduled transactions.
From there, the attacks become highly targeted. Attackers may monitor a company’s systems for months, watching for the days leading up to a closing, which is typically when a payment is about to be wired. Then they send a fake email to the homebuyer, providing instructions on where to wire funds, again spoofing the real estate agency or title company.

Once you’ve sent your money to a fraudulent account, that money is usually gone. Typically, there’s no insurance protection against mistakenly giving your money to hackers, and law enforcement is rarely able to retrieve it.
How to protect yourself:

• Talk to your real estate agent about how the closing process will work. Discuss valid payment methods and how wire transfers would be handled.
• Avoid discussing the closing process via email, and never email your financial information.
• Scrutinize any last minute closing changes. Beware of anyone telling you the procedures have changed, or that the situation is urgent, particularly if that communication comes via email.
• Verify wire instructions. Never wire money without first confirming via phone, no matter how legitimate the instructions look.
• When making confirmation phone calls, don’t use the phone number within the email. Use numbers you know or have been able to verify.

If you believe you’ve been scammed, contact the bank or wire transfer company immediately to request a wire recall, which may be possible if you act fast.

Wire fraud should also be reported to law enforcement, including the FBI’s Internet Crime Complaint Center. The quicker you act, the better chance you have of recovering your funds.