Real estate transactions are one of the most affected by cyber fraud. A survey shows that out of 650 real estate clients, one in four received suspicious or fraudulent communications during their closing process, while one in 20 were victims of cyber fraud.
As a property manager or real estate agent, you must ensure each transaction goes smoothly. You must also protect your client’s personal and financial information and ensure they have a secure portal to transfer funds.
This text will explain what you need to know about wire fraud in Real Estate, including the warning signs, and tell you how to safeguard against these criminal activities.
What is wire fraud in real estate transactions?
First things first, let’s explain wire fraud in real estate transactions. It typically occurs when cyber criminals trick buyers, sellers, or other parties involved in the real estate transaction into sending money to a fraudulent account. This usually happens during the closing process. Since the amount of money involved in this type of transaction is enormous, fraudulent cyber transactions can have detrimental consequences for the victims. The buyers may lose their down payment, or the sellers may lose the property’s proceeds.
Real estate wire fraud is no joke. According to a survey by the American Land Title Association, in 2022, 46% of the people who took the questionnaire set their employees receive at least one email a month attempting to change wire or pay-off instructions. Cybercriminals are tax-savvy and intelligent people who use their powers for evil, so it is easy to trick people involved in real estate transactions.
How does wire fraud happen in Real Estate?
It is a straightforward process – cybercriminals get their hands on information about real estate transactions that is openly available. They can use this information to send timely emails or texts to the involved parties. By opening the email, the affected party may cause the malware to download on the recipient’s device, giving the hackers access to their email accounts or bank accounts. Intercepting those emails, sending instructions, or transferring money to cybercriminals’ overseas accounts is a very effective strategy that cybercriminals use because it is difficult to trace.
Who is responsible when wire fraud occurs?
This is a bit of a gray area because there is no clear answer regarding who is responsible when something like wire fraud occurs. Sometimes, consumers are liable because they willingly authorize the transaction, even under false pretenses. In other cases, real estate agents, brokers, and escrow companies have also been liable, especially when the court finds them negligent.
Signs of wire fraud in real estate
Unfortunately, wire fraud is usually discovered at the closing appointment after the image has been done. But there are a few warning signs behind the curtains that something criminal could happen. Here’s what to look at closely.
- Unexpected changes in payment instructions
- Urgent or last-minute requests
- Emails from an unknown address
- Emails or texts with poor grammar and spelling
- Communication that has errors or inconsistent details
- Communication that requests confidential information
How to prevent wire fraud?
The most important thing to prevent wire fraud in real estate is to be aware and not have that “it won’t happen to me” mindset. You can do several things to protect yourself from wire fraud.
Be suspicious of every email, phone call, or text regarding your transaction, and don’t click on unverified links inside of these emails or texts. For further information, contact the escrow company directly by phone or email to verify if there are urgent requests for money or information without taking the next step. Ask for the recipient’s name and account number and verify all the phone numbers, emails, or websites sent to you. Keep your operating system and security software up to date on the devices that you’re using, and work with the cyber security professional to ensure you have secure payment and communication systems.
What do you do if you suspect a wire fraud is happening?
In this case, you must contact your bank immediately and ask them to stop the wire transfer. In the meantime, you must file a report with the FBI’s Internet Crime Complaint Center. Follow the warning signs of cyber fraud, and take proactive steps immediately if something resembles suspicious activity. Unexpected payment instructions changes, urgent personal information or payment requests, or communication with spelling or grammar errors are all red flags.
Conclusion
Real estate transactions are most targeted for cyber fraud because they involve a lot of money. Liability for wire fraud is not always clear, so cyber criminals often get away with the deed. To protect against wire fraud in real estate transactions, follow the warning signs, be proactive within your property management community or real estate network, and talk to cyber security specialists.
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