The settlement industry is particularly vulnerable to wire fraud. Large sums of money are wired by (often times) anxious buyers and sellers, and most communication is handled via email.
Wire fraud was always present in the industry, but we used to be able to detect it much more easily. Fraudsters use to write in poorly constructed English, and provide faulty wiring instructions to purchasers so early in the settlement process that they raised strong red flags. These days, the perpetrators are highly sophisticated – their knowledge of the settlement process rises to such a level that it is easy to fool even those seasoned buyers, sellers, and title professionals.
This is how it normally happens: a fraudster hacks into the email messages of a party to a real estate transaction (a realtor, buyer, seller, lender, or title agent), and digs through emails and documents to find out how much money is owed for settlement as well as the projected closing date. The fraudster creates a fake email address that closely resembles an email address of a title representative that the buyer has been communicating with. For example, if the buyer were corresponding with “firstname.lastname@example.org,” the fraudster would create and correspond through the email address “email@example.com”. Notice the difference?
The perpetrator would then send fraudulent wiring instructions to the buyer via email, asking for them to wire funds in a specified amount for settlement. If the buyer was not cautious, the buyer would comply with the request, and wire the funds to the fraudster’s account. In many cases, the buyer would never see the money again.
Alternatively, the fraud may be perpetrated upon the seller to a transaction. After the seller has signed documents for settlement, the fraudster would create an email address that closely resembles the seller’s email address, and email the title company requesting that the seller’s proceeds be directed to a different account than the account that the seller provided at the closing table. Because this type of fraud involves an attempt to trick the title professional handling the funds, it is much more easily spotted: most professionals in the title industry have been trained extensively on spotting this type of fraud and can easily detect and defect it.
Follow these best practices to prevent becoming a victim of wire fraud:
1.) Call. Before wiring any funds, call your title company and verify the figures on the wiring instructions.
2.) Check. Always check email addresses for irregularities. Recall that most wire fraud stems from a person creating an email address that looks similar to one that a buyer is familiar with. When replying to emails, use “forward” instead of “reply.” Typing in an email address you trust makes you less susceptible to accidentally replying to a spoofed email.
3.) Beware. Be suspicious of any changes to wiring instructions, particularly on Fridays or before holidays. Title companies will rarely change their wiring instructions, and since it takes up to 72 hours to wire funds, fraudsters typically request funds on Fridays or before holidays so the money is gone by the time anyone notices.
4.) Secure. Secure your devices that you are using to communicate with your real estate agent, lender and title company. Change passwords regularly, and use secure networks when possible. You will be more susceptible to fraud when using Starbucks’ internet than, say, the secure wifi at your personal residence.
5.) Consider using cashier’s checks instead of wiring funds.
For more tips on how to prevent wire fraud, visit https://stopwirefraud.org/.