With the rapid approach of the spring selling season, we want to put a special notice out and generate awareness of the dangers of wire fraud and how to guard against it.
You may have heard about wire fraud and it may sound like a distant threat, but because the vast majority of East Bay real estate sales (and real estate sales everywhere in the U.S. for that matter) happen with transfers of funds by wire, it poses a widespread challenge.
Because wire transfers involve a transfer of money between financial institutions, once a wire is completed the money leaves the sender’s control. Once the transfer to a fraudulent location is complete (more on how that works below), the money is all but impossible to get back.
In just the last six months, we’ve seen two cases of East Bay real estate wire fraud first-hand. In one case, buyers wired payment for a new home with all cash and lost almost $1 million. In another case, buyers lost over $30,000! Their banks could not protect them.
It’s not just the East Bay, of course -- wire fraud is a prevalent issue in the real estate industry. In 2018, wire fraud scammers defrauded real estate consumers of over $150 million, a 17 percent increase over 2017, according to FBI data.
How wire fraud typically works -- email
As title companies typically facilitate most real estate sales, real estate wire frauds involve hackers impersonating a title rep’s email with directions for final payoff. The fraudulent emails match the legit title rep’s email sometimes complete with title, name, email address and more. Upon looking carefully, subtle differences in email addresses could be caught, but within the normal frenetic pace of day to day, these details are easily missed.
Hackers will often change the wiring instructions, but the email still appears as though it's coming from a trusted, known source. Buyers unknowingly open that email, which directs them to wire money to a fraudulent bank account and routing number. If the buyer does not double check, the wire is sent.
How to prevent wire fraud
The best way to avoid falling victim to these traps is to remain skeptical and to carefully double check all wire instructions by phone using the original phone number provided at the opening of the escrow.
After receiving final wire instructions, call the title rep and verify the bank account and routing number to verify they are correct.
To go a step further, plan on calling your title rep or escrow officer as soon as your agent introduces them in the closing process. This way, you all have a relationship and you can easily recognize their voice when making that final verification call.
Trust your gut. If an email has requests for secrecy or pressure to take action quickly, it could be fraudulent. Also know that it is very uncommon for title companies to change wiring instructions or payment info at the last minute, so if you as a buyer receive a note about this, be sure to call your agent and escrow rep before doing anything else.