Real estate wire fraud has been a big pandemic problem
Carly Andreatos was only days away from buying her first home when an email was sent to her by her attorney’s paralegal. In it, she found instructions for wiring her down payment and closing costs – a total of $ 22,890.
Not wanting to delay the closing, she quickly wired the money – literally all of her savings – as directed.
The next morning, however, what Andreatos calls “a nightmare” began. His lawyer never received the funds. This email ? It was a fake – sent by a con artist in an all too common fraud scheme targeting homebuyers.
“It was the worst experience of my life,” says Andreatos, a 25-year-old veterinary technician from West Palm Beach, Florida. “It was all I have ever saved.”
Now the purchase of Andreatos’ house is on the line and she is unsure if she will get her money back. Since the house happens to be the property she is currently renting out, her whole living situation is at stake. “I’m sitting here thinking I’m going to be homeless,” she says.
Unfortunately, stories like Andreatos’ are not uncommon. Real estate wire fraud has been a problem for years, and it has only worsened during the pandemic.
A survey of title agents – those responsible for transferring title to a house and handling the closing and escrow process – shows that a third of all real estate transactions in 2020 included some sort of attempted wire fraud. Meanwhile, 76% of agents say fraud attempts have increased or remained stable from the previous year.
The scam works like this: A scammer gains access to an email account involved in the sale of a home – a real estate agent, lender, title agent, or even the buyer – usually through some sort of phishing attempt. They then monitor emails, monitor transaction progress, and check in at the right time. That’s when they ask the buyer – using a very legitimate looking email – to transfer funds to another bank account.
“These spoofed emails are not the typical fraudulent emails with misspellings and typos,” says Andy White, CEO of ClosingLock, which helps securities companies fight wire fraud. “These are targeted, well-crafted spoofed emails that appear to come from the title or escrow company or the attorney’s office. When there are hundreds of thousands or millions of dollars at stake, you can bet that scammers will take a little while to make these emails legitimate.
COVID has opened more doors for crooks
The FBI has dubbed the scheme “Commercial Email Compromise” – a transaction so common that it saw huge losses of $ 1.8 trillion in 2020. The average victim lost nearly $ 100,000 last year .
The problem is probably worse than it looks too. According to the FBI, only 12 to 15% of all cases are reported. As Diane Tomb, CEO of the American Land and Title Association, says: “The problem is actually much bigger. It is a national epidemic.
The COVID-19 pandemic – not to mention the real estate boom it spurred – has created ideal conditions for e-fraud scams to take off last year. On the one hand, there were simply more transactions to target. The National Association of Realtors shows that 5.64 million breathtaking existing homes were sold in 2020 – the most since 2006.
Additionally, many of these transactions were made online due to pandemic security measures. This made it easier for scammers to get in and in many cases caused buyers to let their guard down a bit.
“There has been huge adoption of the technology over the past 20 months,” says Tom Cronkright, CEO of CertifID, a real estate fraud prevention company. “So a buyer thinks, ‘The fact that I’m being asked to wire money via email – I guess that’s now part of the deal. “”
Rising home prices, along with an increase in all-cash purchases, have also increased the temptation for scammers. As White explains, “Transactions with a high dollar value inherently carry more risk. Scammers are lazy in the sense that they are looking for the biggest and easiest paydays. “
Stephen Dougherty, Secret Service Financial Fraud Investigator and Analyst, investigates cases of business email compromise daily and, along with the Cronkright team, helps Andreatos recover his funds. He says the rise in fraud schemes over the past year – particularly in real estate transactions – has been notable.
“The US Secret Service has observed an exponential increase in commercial email compromises focused on real estate,” said Dougherty, calling the threat of the scams “very high.”
You Can Detect Electronic Fraud Before It Happens – I Did It
Electronic fraud may be extremely common these days, but there are ways to protect yourself – and I am proof of it.
Two days before my current house closed, an email arrived – apparently from my head agent. He said, “You must have the amount of $ 48,754.39 to close in our account today in order to avoid any late closing.”
The number was right. The names and addresses were correct. The email signature was even perfect. Fortunately, I had heard stories of electronic fraud, so I looked closely at the sender’s email. It was a quirky character and a different host domain – immediate red flags.
When I called my title company (from the number listed on their public website – not the one in the email), my suspicions were confirmed: it was a fake. In the end, my keen eye saved me from losing nearly $ 50,000, let alone my house.
Nick Ingalls, a Verywell Mind editor, had a similar story.
“I wonder – if I wasn’t an editor and general grammar enthusiast – if I maybe missed it and just wired our house,” says Ingalls, who suspected fraud because of wrong phone number.
Yet incorrect information is only one way to detect fraud. According to Cronkright, successful fraudulent emails often have four things in common: a call to action, some sort of new or updated information, a request for confirmation (so that crooks can redirect funds quickly) and the word “nicely”.
Crooks are also increasingly using COVID-related excuses, he says.
“They’ll say something like, ‘Because of COVID, we’re understaffed right now, and you have to send it to me today,’ Cronkright says. They can also mention vaccinations, office outbreaks, local shutdowns, and other urgent and pandemic issues to make the message more urgent.
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How to protect yourself against electronic fraud
If you’re preparing to buy a home, having strong passwords and multi-factor authentication in place, both on your email and social media accounts, can help prevent fraud long before it happens. ‘reaches your inbox. Being wary of links or attachments in emails can also help.
“Criminals start the wire fraud process long before the attempted theft occurs,” says Tomb. “Most often they start with a common social engineering technique called phishing. This can take the form of fake emails, phone numbers or websites to fraudulently obtain private information. Criminals trick users into entering their information or clicking a link that allows hackers to steal login and password information.
You should also talk to your lender and securities company about what you owe, when you owe it, and how you will be asked to pay – so you know when to be suspicious. It’s also a good idea to ask about the company’s digital security measures.
Finally, if you receive transfer instructions in an email, always perform a voice verification before sending funds.
“Buyers should never trust transfer instructions or phone numbers in an email,” White says. Instead, they can Google the company they work with and call the main office number to confirm the transfer instructions. After the funds are transferred, buyers must confirm that the settlement company has received them. Again, use a trusted phone number.
And don’t forget: you can still ask to pay by cashier’s check instead of transferring your funds. While it does require going to the office, it ensures that the money is in good hands.
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Act quickly if you are the victim of electronic fraud
No matter what precautions you take, there is always a chance that you will be the victim of wire fraud. If this happens, it is imperative that you act quickly.
“Detecting that you sent money to the wrong account within 24 hours is the best chance of getting your money back,” says Tomb. “Victims are often embarrassed to have been scammed and do not report the theft. But if the victims act quickly, there is a chance that the money can be recovered. “
Andreatos says her situation was “the most embarrassing situation that has ever happened”, but she reported the scam anyway – within 12 hours. While his funds have yet to be returned (they are currently on hold while the banks investigate the issue), they have also not been channeled to the fraudster.
Be careful, the case of Andreatos is not the norm. Only 29% of victims see their funds fully recovered. In 40% of cases, 10% or less is recovered.
If you think you have been a victim, call your bank and ask them to call back the wire transfer immediately. Then report the crime to the FBI Internet Crime Complaints Center at IC3.gov. You should also call your regional FBI office and your local police department, as they may be able to help you as well.
“Buying a home is exciting, but it can also be a stressful process,” says Tomb. “When you’re dealing with multiple stressors at the same time, it’s easy to let your guard down. These criminals are counting on your trust. They know you trust real estate transaction professionals, and they use that trust to steal from you. If you are not vigilant during the home buying process, you can quickly become a victim.
More money :
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