Real Estate Wire Frauds Are Still On The Rise: What You Need To Know To Protect Yourself

By a Biometrica staffer

There were 13,638 victims of real estate/rental fraud in 2020, amounting to a loss of over $213 million according to the Federal Bureau of Investigation’s (FBI) Internet Crime Report for the year. That’s a 16.7% jump in victim numbers from 2019, although the amount of money lost was higher in 2019, coming in at over $221 million. Within real estate fraud, wire fraud at the time of closure is becoming an increasing concern amongst realtors and consumers alike. Wire fraud and title fraud risks increased by around 90% from Q4 2020 to Q1 2021, according to loan-level fraud prevention & risk management company FundingShield’s Q1-2021 Market Wire Fraud Risk Analytics report. One in three transactions had wire and title fraud risks during Q1 2021, FundingShield’s report added.

In October 2020, CNBC reported in moving detail the story about a family who wired $921,235.10 to what they thought was their mortgage company. Only, it wasn’t. In this family’s case, they were having an email conversation with their real estate agent and legitimate representatives from the title company. But hackers somehow managed to insert themselves into the conversation, using email addresses designed to look like one or more of the participants in the deal, CNBC reported.

The fraudsters even emailed digital copies of the real closing documents and wire instructions that looked real from the fake email account. Luckily, this family’s story has a happy ending, as their bank was able to recover the money, but most victims are not as fortunate.

Real estate wire fraud is becoming increasingly common, the CNBC report said, citing FBI. Consumers had lost more than $220 million in schemes like this when the CNBC reported the story in October 2020, a 13% increase from the same period on a year-ago basis. Keeping in mind this larger backdrop of the frequency of real estate wire frauds going up, we take you through what you need to look out for as a homebuyer/renter, or as a prospective homebuyer/renter, before making that all-important wire transfer to buy or rent a home.

Wire Fraud Basics

Quite simply, wire fraud is just any incident that involves an individual being tricked into sending money through wire transfers to fraudsters. It can range from imposter scams and debt collection schemes to even identity theft.

What makes real estate transactions a ripe target for these types of frauds?

For one, it involves multiple parties, often those who have not worked together before and, in some cases, could even include those who have not met. The parties can include buyers, sellers, real estate agents, mortgage lenders and title, closing and settlement agents. Second, the amount of money involved in real estate deals are high. The average mortgage loan for newly built houses in the U.S. is now $370,000, Ike Suri, CEO & Chairman of FundingShield, wrote in a May 18 Forbes column about combating mortgage wire frauds.

“All that money, anonymity and desire can play right into the hands of scammers who hack into the email of one or more parties to monitor the transaction. Then, at just the right time, they’ll contact the buyer, the lender or both and impersonate the title company with fraudulent wiring instructions to divert the money. If the money is sent to the scammer, it might never be recovered, which can be especially devastating to a buyer who’s saved for years to amass the down payment,” Suri wrote in that column.

How do scammers find out about real estate deals in the first place, though?

There can be several ways, but the National Association of Insurance Commissioners (NAIC) says fraudsters can use online real estate shopping tools to seek out transactions getting ready to close. Then they hack into a not secured email account of one of the individuals involved in the transaction, and use that information to send wire transfer recipient details to unsuspecting buyers.

Tips To Protect Yourself From Wire Fraud

Wire fraud in real estate can involve everything from posting fake or cloned rental listings for apartments, to imposter scams and phishing-like scams. In general, though, there are a few things you can do as a homebuyer, or even as a renter, before wiring money to anyone.

Before You Wire:
Wiring money is like sending cash — once it’s gone, you probably can’t get it back. On the topic of wiring money, this is also a good time to remind everyone that you should never wire money to a stranger — no matter what reason they give. Here are some excerpts from the Federal Trade Commission’s Consumer Information guide on scammers and wire frauds:

• Remember that scammers know that once the money reaches them, there are very slim chances of you getting it back.
• They can pick up the money at any of the wire transfer company’s locations, and know it will be nearly impossible to identify who picked up the money or to track them down.
• Say you respond to an ad for an apartment with surprisingly low rent. Even before you see the apartment, you’re asked to wire money in the guise of application fee, security deposit or the first month’s rent. In such cases, you will mostly discover after you’ve wired money that there really is no apartment for rent, or that the scammer put their contact information on someone else’s photo or rental ad.
• Scammers can run similar schemes for vacation rentals too.
• Never wire money or send a check to someone you’ve never met for an apartment you’ve never seen. If you can’t meet the landlord in person because they live or are traveling outside the country, keep looking. If you can’t see the actual apartment before you pay application fees, a security deposit or sign a lease, again, keep looking. 
• If you receive an email pressuring you to make an on-the-spot decision for a rental, ignore it and move on. 
• The lower the price for a premium listing, the more likely it is a scam. 
• On the other hand, if you are a landlord looking to rent out a place, watch out for scams involving fake checks. A scammer could reply to your ad saying they have a cashier’s check ready for you to deposit in your bank account for more than the rental price. They may then ask you to wire them the difference once you’ve deposited the check. Unfortunately, once the bank figures out the check you deposited is a fake, you are responsible for repaying all of the money, including the cash you wired to the scammer!

What do you do if you have already wired money to a scammer? Here’s what FTC says:

• If you’ve sent money using a wire transfer company like MoneyGram or Western Union, contact that company right away. Tell them it was a fraudulent transfer. Ask them to reverse the wire transfer and give you your money back.
  Contact MoneyGram at 1-800-MONEYGRAM (1-800-666-3947) or
  Western Union at 1-800-325-6000
• If you sent the wire transfer through your bank, contact them and report the fraudulent transfer. Ask if they can reverse the transfer and give you your money back.
• You can also report the fraud to the FTC at ReportFraud.ftc.gov.

Imposter Scams And Phishing Scams

When it comes to homebuying, the scams can get slightly tougher to spot than fake rental ads, as in the case we mentioned at the start of this piece, about the family that nearly lost close to $1 million.

Imposter scams can involve calls or emails from people you seem to know, too, not just strangers. It could even appear to be from someone you have not met in person but have been corresponding with online, like closing agents, realtors, etc. Scammers could also resort to phishing emails to get you to wire money to them. They can make the emails look like they’re from a company you know or trust.

Here are a few signs you can watch out for to protect yourself from imposter scams, phishing emails or hacking of legitimate conversations:

• Look very closely at the sender’s email address before clicking on anything, especially a payment link, or initiating a wire transfer. Scammers often change just one letter to make it inconspicuous to their victims.
• When it comes to real estate deals, make sure you do not wire any money unless you speak to your realtor, mortgage broker, attorney, and/or whoever else has been your point of contact through the course of the transaction so far, ideally through their official or listed number, and confirm all wiring instructions.
• Watch out for any last-minute changes in wiring instructions. If that happens, do not initiate a transfer. Instead, once again, call someone you trust who is involved in the transaction and re-confirm details.
• Do not wire any money until you’re sure the information is correct. Even if you are in a hurry to close the deal and are excited to own a new home, it’s wise to pause and double-check the information before proceeding.

If you have received a phishing email, the FTC website says you can forward it to the Anti-Phishing Working Group at reportphishing@apwg.org. If you got a phishing text message, forward it to SPAM (7726).