Top 5 Tips For Preventing Wire Fraud In Real Estate
High-dollar real estate transactions are attracting new, more sophisticated forms of wire fraud.
So it's more important than ever for title insurers and investors to follow protocols to ensure money transferred by wire is carefully guided to the right destination, whether for real estate closings or for construction escrow services.
In 2020, the FBI reported 13,628 people were victims of wire fraud in the real estate and rental sector, a 17% increase over 2019, with losses of more than $213 million. And the pandemic has only accelerated this trend.
Here are five tips for investors to avoid becoming a victim of wire fraud.
1.) Do not follow an email's wiring instructions
No matter how legitimate a request for funds looks, do not follow the email's instructions. "Spear phishing" -- the fraudulent practice of sending emails ostensibly from a trusted sender to induce targeted individuals to reveal confidential information -- is on the rise.
If a real estate broker's email is spoofed or hacked, the cybercriminal can manipulate emails to outsiders that cause falsifications in documents -- from wiring instructions to payoff letters. These emails use clever tactics to get the victim's attention, like "closing tomorrow" or "wire needed" subject lines. However, brokers do not typically send wiring instructions via email.
Look closely at the sender's email address as one letter could be off. Also, review the email's text for grammatical errors, run-on sentences and font inconsistencies. If you receive a fraudulent email, forward it to the broker or title agent so their company can be aware of the fraudulent activity.
2.) Do not call the phone number listed in an email
Do not call any phone numbers listed in the email or the email signature. Instead, call the number on the business card the broker provided to confirm wiring instructions. If you don't have a business card, type the broker or escrow company's website in the address bar rather than using a Google search for the company. A Google search can lead you to a fraudulent, look-alike website.
3.) Do not click on links sent to your cellphone
Smishing is a new scam where someone sends a text link to your phone which, in turn, sends your personal information to the cyber attacker or instantly downloads malicious programs to your smartphone. Do not clink on links from an unrecognized source.
4.) Protect construction escrow accounts
A lender financing a construction project often utilizes a construction escrow account, which can be a target for scammers. At Proper Title, we manage these accounts, releasing payment to the contractor once work is completed.
Specific red flags in distributing funds include a general contractor or subcontractor requesting money be wired in lieu of picking up a check or providing new wiring instructions where the receiving bank may be the same, but the account number may be different.
In these instances the party handling the construction escrow should call the bank using a known number to confirm.
5.) Add an extra layer of protection
Even the most seasoned real estate professional can be fooled as these attacks are cleverly customized and becoming more difficult to detect. To combat wire fraud, Proper Title has begun rolling out ClosingLock -- an online platform with extra protection that makes it easy for our customers to securely provide us with wire information.
Property buyers will be notified via text or email to login to ClosingLock where they can securely upload wire instructions.
Any time money changes hands there is an opportunity for scammers to intercept funds. But by following the tips above, you can make sure fraudsters don't interfere in your next transaction.
Written by Kim O'Donnell, vice president of business development for Proper Title LLC. This article was originally featured in The Daily Herald.