Avoiding Wire Fraud
Section: Everyone Guides
Author: Susan Isaacs, Washington DC Real Estate Strategist
Wire fraud is becoming more common in the U.S. These attacks, in the form of email hacks and phishing schemes, have increased dramatically, with an unprecedented number of attempts globally. Real estate transactions are a prime target because the numbers are large and transaction details are often sent and received via vulnerable email accounts.
How Does Wire Fraud Occur In Real Estate?
Scammers hack email accounts of real estate agents, title companies, or buyers. These criminals may monitor messages for weeks to confirm closing dates, transaction participants’ names, whether or not wire transfers will be used, and the exact dollar amounts for those deposits and settlement funds. When the time is right, they send a convincing email with new wiring instructions, typically just before the settlement occurs. Once the buyer wires funds, thieves intercept it and quickly move the money. The recovery rate for this type of theft is very low.
Wire Fraud Warning Signs
Last Minute Changes: An email claims the title company’s wiring instructions have changed
High Urgency: Messages pressure you to wire funds right away
Email Errors: The sender address differs slightly from the ones you’ve received previously from your real estate agent, lender or title representative.
Steps To Protect Yourself From Wire Fraud In Real Estate
The best protection for a real estate consumer is to avoid interacting with real estate agents, mortgage lenders and other third partirs regarding details of wire transfers.
Always use phone communication, not email, with your bank and title company
Always use the phone number you’re positive is valid, not numbers provided in email requests
Beware of changes in wiring instructions. Contact the title company immediately using the phone number you know, to discuss and confirm. Speak with the person you know. If you’re at all uncomfortable, don’t wire. Change your method of payment
Never email financial information
Do not CC your real estate agent or other transaction parties when communicating about wire transfers
Other steps you can take:
Immediately report and delete unsolicited e-mail (spam) from unknown parties
DO NOT open spam e-mail, click on links in the e-mail, or open attachments. These often contain malware that will give subjects access to your computer system
Do not use the “Reply” option to respond to any business e-mails. Instead, use the “Forward” option and either type in the correct e-mail address or select it from the e-mail address book to ensure the intended recipient’s correct e-mail address is used
Beware of sudden changes in business practices. For example, if a current business contact suddenly asks to be contacted via their personal e-mail address when all previous official correspondence has been through company email, the request could be fraudulent. Always verify via other channels that you are still communicating with your legitimate business partner.
Are Wire Transfers In Real Estate Insured?
Typically, no. Standard insurance and bank protections do not automatically cover consumers for real estate wire transfer theft.
Standard bank error protections and Federal Deposit Insurance Corporation (FDIC) insurance do not cover authorized wire transfers sent to a fraudster
Most standard personal homeowner’s insurance policies or personal umbrella policies exclude social engineering and wire fraud losses
Business vs. Consumer: While real estate brokerages or title companies might carry cyber liability or commercial crime insurance, these policies rarely protect a homebuyer’s personal funds directly and often carry strict security requirements or low caps.
KVS Title’s Safeguards: KVS Title uses Qualia Shield, which includes facial recognition identity verification, public records checks, and suspicious email detection as provisions that can stop wire fraud before it happens.
If You’re A Victim Of Wire Fraud
If your funds are transferred to a fraudulent account, it is important to act very quickly:
Contact your financial institution immediately upon discovering the fraudulent transfer to see if it can be recalled or traced
Request that your financial institution contact the corresponding financial institution where the fraudulent transfer was sent
Contact the title company immediately to alert them of the situation. Request that they immediately contact their financial institution
Contact your local FBI office if the wire is recent. They and the U.S. Dept of Treasury Financial Crimes Enforcement Network might be able to help return or freeze the funds
File a complaint, regardless of dollar loss, with www.ic3.gov or, for BEC/EAC victims, bec.ic3.gov
Contact the Enforcement and Consumer Protection Division of the District of Columbia Department of Insurance, Securities and Banking at (202) 727-8000.
When contacting law enforcement or filing a complaint with IC3, identify your incident as “BEC/EAC”; also consider providing the following information:
Originating business name
Originating financial institution name and address
Originating account number
Beneficiary name
Beneficiary financial institution name and address
Beneficiary account number
Correspondent bank if known or applicable
Dates and amounts transferred IP and/or e-mail address of fraudulent e-mail
Detailed descriptions of BEC/EAC incidents should include:
Date and time of incidents
Incorrectly formatted invoices or letterheads
Requests for secrecy or immediate action
Unusual timing, requests, or wording of the fraudulent phone calls or e-mails
Phone numbers of the fraudulent phone calls
Description of any phone contact, including frequency and timing of calls
Foreign accents of the callers
Poorly worded or grammatically incorrect e-mails
Reports of any previous e-mail phishing activity.
For additional tips, visit IdentityTheft.gov.
Disclaimer
We are not attorneys, legal experts, investment counselors, or CPAs. The content on this channel is presented for informational purposes only and derived from reliable sources, but should not be considered legal, financial, investment, transaction or real estate practice advice. Susan Isaacs and Compass, their principals and/or representatives, do not guarantee or warrant its accuracy, completeness, or applicability to any specific real estate transaction. Homebuyers should read applicable D.C. law and code as part of their due diligence, and seek help from licensed, qualified professionals for interpretation and application to their specific transaction.