In an increasing technology centric world, online fraud is becoming more common and recently there have been some issues with wire fraud issues on the real estate side, so as a home buyer and home seller please be aware...
Home Buyers: How to Avoid Wire Fraud
We continue to hear about real estate wire scams, so I wanted to share this particular example with all my contacts so as to avoid a serious problem for those buying a home in the future.
The scam is occurring around the time when a buyer’s offer should or would be accepted by the seller which is also the time when the process is least understood by the buyer (especially with inexperienced or first-time home buyers) and when emotions and excitement are running the highest.
How It Works!
It all starts with a compromised email account of a real estate broker/agent. Once criminals get access to the messages (either though phishing or keylogging), they collect identifying details on each deal that is about to close.
Pretending to be the buyer’s agent (called spoofing), they email the buyer with a very realistic looking emails with wire transfer instructions, urging the buyer to quickly transfer funds to close the transaction.
The buyer, thinking the email came from their agent, then transfers the money via the instructions which goes right into the hackers account. From there, it is either immediately withdrawn by the hackers, or transferred overseas, making it very difficult to trace and recover.
How to Avoid Getting Scammed
If a buyer is being scammed, neither the buyer’s agent or escrow officer assigned to the transaction will be aware that the buyer received an email stating an offer was accepted and funds need to be transferred immediately. So here are the red flags to look for and what the buyer needs to do to avoid a potential disaster.
1. If a buyer did not hear from their agent directly that an offer was accepted before receiving wire transfer instructions that is the that is red flag #1.
2. Escrow is not established until an offer is accepted. Escrow these days is done via a secure, encrypted website that is set up with the buyer and the appointed escrow company with an ID and password the buyer creates.
Therefore, when the buyer receives escrow instructions they should already know the person, escrow company, phone # and should have already established an ID and password that the buyer creates. Also, by law once an offer is accepted, the buyer has 3 days to make the initial deposit, so the buyer should not receive any “urgent” emails to wire the funds. Anything different from the above is red flag #2.
Actions the Buyer Needs to Take
1. When a buyer receives wire transfer instructions, they should immediately call their agent and verify that what they received is correct. The buyer should not click on any links until they know what they received is correct via their agent. This is absolutely critical and if done should avoid any potential scam.
2. There are two ways to get the funds to the escrow company safely once the buyer has verified that the instructions and account information is correct.
a. Print out the instructions, go to your bank and have them wire the money from your bank. Do not wire the funds from your computer at home and definitely not from a computer using public WIFI such as Starbucks, etc.
b. If the escrow company is located within driving distance from your bank, go to your bank and get a cashier’s check and hand deliver it to your known escrow company and officer.
In summary, if you follow points there should be absolutely no issues. I hope this information will help to avoid a really bad issue in the future! For more information on wire fraud or if you have other real estate related questions, please contact our team.