What is wire fraud in real estate?
November 16, 2020
In recent times, scary headlines have people wondering: what is wire fraud? In real estate, we frequently talk about wire fraud – and warn our clients of the dangers of it – but rarely do we address what it actually is.
Today, I wanted to break down what wire fraud is and how we generally advise our clients to protect themselves against it.
What is wire fraud?
Wire fraud is a fairly expansive term. In general, wire fraud is any form of fraud in which a scammer tricks a victim into sending money on false pretenses.
More specifically, in real estate, wire fraud involves criminals tricking victims into wiring money while pretending to be the victim’s title or escrow agent, real estate broker, lender, or other party.
How prevalent is wire fraud?
Sadly enough, wire fraud continues to run rampant. It continues to increase year-over-year. According to the American Land Title Association, both the number of victims (11,677) and the total amount of damages ($221 million) increased in 2019. Further, most wire fraud appears to go unreported, meaning it may be far worse than we realize.
Certain areas appear to be more widely targeted than others. Some risk factors appear to be aging populations, lower levels of education, proximity to the border, and English literacy rates. All of these factors may indicate a higher number of people who are unable to protect themselves against social engineering tactics. Criminals thrive on a lack of education and information.
The damage from wire fraud is real. So let’s talk about what it looks like.
What does wire fraud look like?
In general, wire fraud can come in many different forms. Criminals continue to further develop their skills and become better at the crime. As they do, it becomes more difficult to see the difference between legitimate communications from title companies and false information.
The scam usually looks like this: you receive a text, email, or even phone call from someone claiming to be your escrow agent, real estate agent, or lender. They provide wire instructions for you to send your earnest money or closing funds.
These communications are deceptively professional and generally incredibly similar to legitimate communications. Because of spoofing, they can often appear to come from people you’ve already spoken to.
How to protect yourself
There are many forms of misinformation, such as fake news. Most of these rely on people failing to do their due diligence. Unfortunately, this situation is no different. While no single measure can guarantee 100% security, there are several practices you can use to lower your risk of falling victim:
- Ensure the people you are speaking with are who they say they are. Some title agents are willing to arrange a “secret message” or “password” system. This will allow you to verify their identities when communicating via text, email, or phone call.
- When you receive instructions for sending money, talk with the person using known means before the transaction. For example, call a known business phone number to verify.
- Work with a title company that provides secure portals for sending funds. Fidelity National Title is one example that has made great strides toward providing extra protection over the past year.
- Perhaps best of all: deliver funds in person with a cashier’s check when possible and restrict communications to face-to-face contact. Although covid-19 has made this more difficult, it is still the safest option.
How real estate professionals can protect you
Most importantly, choose to work with a team who takes wire fraud seriously. Real estate professionals, from brokers and lenders to closing agents, have a duty to protect consumers. If you’re concerned about wire fraud (and you should be!), be sure to ask every professional what they can do to help mitigate your risks. A good real estate broker, for instance, should be able to explain wire fraud and what steps they take to prevent their clients from falling victim.
For more information on how we protect you at Dumb Blond, be sure to reach out to us! We’d love to talk more about what protections we offer our clients and how our partners coordinate safety measures.
Have you had a run-in with a scammer? Do you know somebody who has? Leave us a comment below to tell us about your experience! Also leave a comment if you have additional ideas or suggestions for how people can protect themselves!