There are always crooks and other bad guys out there trying to figure out how to rip people
In the real estate industry almost all transfers of fund is done electronically these days. Only smaller transaction still use Certified (or Cahiers) Checks. Most are completed using wire transfers from the mortgage company or from the buyers’ bank (or both). In all cases the instructions to the banks or mortgage companies about where to wire the funds come from the buyer or the buyers’ lender.
The most popular method of stealing these days involves the bad guys gaining access to the email accounts of the buyers, the buyers’ real estate agents or the buyers’ title company escrow agents. Those are the people that the buyers and agents have been dealing with all along, in most cases by email, as well as phone calls and messages. They are trusted people in the transaction.
The bad guys watch the emails in the accounts that they have hacked and when the instructions for where to wire the funds for the sale come through they are ready to pounce. Usually right near the closing time, the bad guys send a fake email, using the valid agent or title company email addresses that they have hacked. In that email, they will ask the buyer or his bank/mortgage company to change the address of where to wire the money to an account somewhere that they control.
So, you get that email and it appears to be from someone that you’ve been emailing back and forth with about the closing and the wire transfer. You make the change with your bank and get ready to head out to the closing. Maybe your bank is a small, less sophisticated institution with little experience with this type of fraud, so they react to the email from you or from the tile company (remember it’s really the bad guys sending those emails) and change the address that they send the wired funds to.
If that last minute change is not caught by alert agents or title people or the banks the money is wired to that new account where it vanishes almost immediately. It can be nearly impossible to track what happened to the money and it is a long battle to try to get the money refunded by the parties involved, if that can be done at all.
So, the California Association of Realtors (CAR) has put out a Wire Fraud Advisory (WFA) with helpful tips on preventing this type of fraud:
The WFA makes 5 specific recommendations.
1. Obtain the phone number of the Escrow Officer at the beginning of the transaction.
2. DO NOT EVER WIRE FUNDS PRIOR TO CALLING YOUR ESCROW OFFICER TO CONFIRM WIRE INSTRUCTIONS. ONLY USE A PHONE NUMBER YOU WERE PROVIDED PREVIOUSLY. Do not use any different phone number included in the emailed wire transfer instructions.
3. Orally confirm the wire transfer instruction is legitimate and confirm the bank routing number, account numbers and other codes before taking steps to transfer funds.
4. Avoid sending personal information in emails or texts. Provide such information in person or over the telephone directly to the Escrow Officer.
5. Take steps to secure the system you are using with your email account. These steps include creating strong passwords, using secure WiFi, and not using free services.
The electronic systems that we’ve all become dependent upon are convenient, but they are also easily used by bad guys to defraud us. Be extra cautious when wiring money for a real estate closing is involved and make absolutely sure that the address that you are wiring funds to is a valid one that was supplied by the title company escrow agent. It is much better to be overly cautious that it is to be sorry for letting yourself be fooled. Assume that the bad guys are after your money and protect yourself.