With all the buzz about wire fraud for home purchase closings, it’s hard to believe this scam is still successfully separating homebuyers from their money and their dream home.
The FBI reported in 2017 that nearly $1 billion was diverted or attempted to be diverted from real estate purchase transactions and wired to fraudulent accounts. In 2016 the FBI noted $19 million in wire-transfer fraud affected closings for buyers and sellers.
So how does the scam work? First, hackers gaining access to a title company or real estate agent’s email account, silently watching for upcoming home purchases and then targeting cash down payments or all cash buyers. This also includes home sellers who are buying a new home with the proceeds from their home sale. At some point before closing, the scammer takes on the identity of the title agent with a very similar email address and the same logos and signatures the buyers have seen in other correspondence. They then send the buyer instructions to wire the funds to a fraudulent account.
Once the money is wired, there is a very tight window of time to reverse the wire, as these fraudulent accounts are usually international and bounce-wire from one account to several others very quickly. Even when the wire has been successfully caught and reversed, it’s likely that not all the funds will make it back to the buyer.
There are three key ways you can protect yourself when wiring money for a home purchase:
One, pay attention to how wire instructions are sent. Check email and phone numbers to verify they match what you have on record.
Two, before you wire funds to an individual or company, call to verify the wire instructions independently with the title company or closing agent, and make sure the number you are calling is legitimate and not the scammer.
Three, be very wary of any changes to wire instruction, email address or phone numbers, and urgent emails putting pressure on you to act immediately. Scammers know home buyers are busy and distracted in the final weeks before closing, and count on you to follow instructions without looking closely.
The best defense against this type of scam is having multiple checkpoints to ensure everything you are being instructed to do is legitimate. Realtors are concerned about this growing issue, and want to make sure that anyone planning to buy a home, investment property, or replacement home are aware of this risk and how to prevent it.