Each year, real estate wire fraud scams claim millions of dollars from unsuspecting buyers trying to close on their new homes. According to the FBI’s 2021 Internet Crime Report, real estate wire fraud totaled more than $350 million in 2021. CoreLogic noted a 15% year-over-year increase in wire fraud from the first quarter of 2021 to the first quarter of 2022. Four metro areas in California made it to the top ten list of the company’s Mortgage Fraud Risk Index, including greater Los Angeles.
How Real Estate Wire Frauds Work
Mortgage fraud scams take several forms, but they have one thing in common. The scammer tricks the victim into giving personal information or depositing money in the scammer’s account. Sometimes they do this by hacking into an escrow company or real estate agent’s email system, or they mimic the logos used by an escrow company or real estate agent to win the victim’s trust. In both cases, they may send fraudulent wire instructions to the victim, who then unknowingly sends their money to the wrong account.
After completing the transfer, the victim typically never sees the money again. The scammers know what they’re doing. They move the funds as quickly as possible out of that account. Since victims almost never know the scammer’s identity, they rarely recover the funds. Since recovering the money can be next to impossible, taking steps to prevent the fraud from happening is essential.
Tip 1: Talk to the Real Estate Agent and Escrow Company
Buyers should know the names and contact information of all the real estate professionals on their team, including the real estate agent, broker, and escrow company. This includes telephone numbers and direct emails so the buyer can verify all forms of communication they receive about the sale and closing. When questions arise about the closing process or the wire instructions, the buyer can reach out directly to verify the details.
Tip 2: Confirm the Wiring Instructions Before Hitting Send
When buyers receive wiring instructions, they should always confirm them with their escrow company verbally over the phone. As an added layer of precaution, Buyers should also ask their escrow company to provide them with key details related to their escrow account to ensure the accuracy of the wiring instructions. This is good practice even when they’re sure they received the information directly from the correct escrow company. It’s an extra layer of protection that can help the buyer avoid sharing personal information with a stranger.
Tip 3: Make Sure the System Is Secure
Since scammers sometimes hack online platforms, following universal internet security guidelines can help protect the buyer’s information. They should make sure their firewall and antivirus programs on the devices they use are up to date and only use encrypted email options to send messages to the real estate agent or escrow company. Learning how to recognize secure websites and being careful to avoid opening attachments from people they don’t know also help prevent this type of crime.
Tip 4: Confirm Receipt of the Transfer Immediately
After sending the wire transfer, the buyer should call the escrow company immediately to verify they received the money. If the transfer went through correctly, they have peace of mind knowing this step in the closing process is complete. If there was an error and they catch it quickly, they have a better chance of recovering the funds than if they wait until the scammer has withdrawn the money from the account. They also can notify local police about the crime.
Tip 5: Be Suspicious
A little suspicion goes a long way toward protecting buyers from wire fraud. If a buyer receives an email related to the purchase of a home or closing on the sale, they should confirm the details with the escrow company — even if the email appears legitimate. Scammers sometimes masquerade as authorized representatives, and they use increasingly sophisticated techniques to trick their victims. Having a team of professionals they trust to review information they receive is useful as well since they may be able to identify discrepancies like incorrect routing numbers.
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