7 Victim Stories detailing how cybercriminals have defrauded real estate transactions.
Many cases of real estate wire fraud go unreported in the media and to the FBI. However, the FBI Internet Crime Complaint Center (IC3) reproted 11,300 victims in 2018 leading to $149 million in losses, and 9,645 victims in 2017 with $56 million in losses. Below are some real stories of people who became victims of real estate wire fraud.
Utah: Elderly Buyers Defrauded
In Utah, an elderly couple received wire instructions from their real estate agent via email. Within the email, the agent added, “I will be in a workshop all day, so don’t try to call me.” Being considerate of the agent's schedule, the couple wired the funds without calling to confirm the instructions.
It wasn’t until the real estate agent received a call from the title company, requesting the buyer’s down payment that they realized the funds had been sent to a cyber criminal. Unfortunately, the elderly couple was not able to recover their $91,000.
Chicago: Buyers Defrauded from Spoofed Attorney Email
In Chicago, buyers received an email from their real estate attorney's assistant, with wire instructions attached. The attachment, on the attorney's letterhead, included the address of the property, the title company's information and the exact balance owed: $307,000.
The buyer's sent the wire but the attorney never received the funds. They later discovered that cyber criminals spoofed the assistant’s email address, sending fake wire instructions that contained their own banking information. Therefore, the down payment was wired to the cyber criminals and not the attorney. The funds were not recovered, causing the victims to lose the entire $307,000..
Colorado: Realtor Wired Buyer Funds
An attorney handling a settlement in Colorado received a request for wire instructions to the escrow account from the buyer's realtor. Another attorney at the firm emailed the realtor with an attachment containing the wire instructions on the law firm's letterhead. There was nothing suspicious about the attachment so the realtor forwarded the instructions to the buyer. The buyer wired their money the day before closing. The following day, at the closing table, the settlement attorney made it clear that they did not receive the $180,000 down payment from the buyer. They soon realized that the wire instructions the realtor had received were fake. Hackers had copied the attorney’s letterhead and put their own bank account information on the attachment .
They tried to recover the funds right away by calling the receiving bank; however, all but ten percent had already been sent to another account, at another bank. They contacted the FBI, who was, fortunately, able to freeze the entire $180,000; however, it took several months for the banks to return the funds to the buyers. The buyers had to cancel their contract on the new home and purchased a heavily mortgaged townhouse instead. Once their funds were fully recovered and accessible, they were able to pay off the townhouse's mortgage.
New Jersey: Mortgage Payoff Defrauded
Three weeks after closing and receiving their proceeds, a New Jersey couple, who had just sold their house, received an email from their bank stating their payment on their old mortgage was successful. They called their bank to question the payment because that mortgage should have been paid off after closing and discharged soon after. They soon discovered that after the closing, the mortgage was never paid off and no discharge of mortgage was ever filed.
Further investigation revealed that their attorney's email account had been compromised. Therefore, prior to closing, the hacker was reading all of the emails about the couple's transaction and when the couple had forwarded the lender's payoff information to their attorney, the hacker was able to see all all. Using the lender's payoff document as a template, the hacker created a replica that listed their own bank account information.
The hacker then used the attorney's email account to send the fraudulent payoff document to the settlement company. Subsequently, instead of wiring the mortgage payoff to the lender, the title company wired the $239,000 straight to the hacker.
After 16 months of communication between the lender, title company, the title company's insurance provider, the couple's mortgage was finally paid off and mortgage discharge paperwork was filed.
Oregon: Life Savings Gone Forever
In September 2016 a Washington lender's email account was compromised which led to a real estate broker's email account getting compromised. With access to both a lender and broker's email accounts, cyber criminals were able to learn all of the buyer’s personal information and the nuances of their transaction.
The title company received wire instructions from the realtor and distributed the funds accordingly. After closing and disbursement of funds, the seller realized they were missing $60,000 of their proceeds. When the seller realized they never received their payoff, they contacted the title company, who immediately contacted their bank and the bank where the money was wired. Ultimately, $25,000 was able to be recovered.
The title company’s email accounts were never compromised; however, they were the recipients of the fake wire instructions that appeared legitimate. The title company claims they they had been training their team on wire fraud and still ended up falling for the scam.
Michigan: Buyers Recover more than half of Defrauded Funds
The day before closing, a buyer in Michigan received their wire instructions via email. They subsequently, wired their funds as instructed. The following day their real estate agent called the buyer, reminding them to bring a $135,000 check to the closing for their down payment.
The buyers soon realized the wire instructions they received were fraudulent and they had already sent their down payment directly to a cyber criminal. They immediately notified their bank and the receiving bank and along with the FBI in attempt to retrieve their funds. Because they acted quickly, these buyers were able to retrieve $120,000 of their down payment.
While these buyers were lucky enough to get a majority of their money back, they still ended up losing $15,000 to cyber wire fraud.
Title Company Wires Funds to Fraudulent Account
In September 2016 a Washington lender's email account was compromised which led to a real estate broker's email account getting compromised. With access to both a lender and broker's email accounts, cyber criminals were able to learn all of the buyer’s personal information and the nuances of their transaction.
The title company received wire instructions from the realtor and distributed the funds accordingly. After closing and disbursement of funds, the seller realized they were missing $60,000 of their proceeds. When the seller realized they never received their payoff, they contacted the title company, who immediately contacted their bank and the bank where the money was wired. Ultimately, $25,000 was able to be recovered.
The title company’s email accounts were never compromised; however, they were the recipients of the fake wire instructions that appeared legitimate. The title company claims they they had been training their team on wire fraud and still ended up falling for the scam.
While some of these victims were able to retrieve all or a portion of the funds they lost, it is more common that people end up losing everything. These seven victim's stories confirm the significance of educating team members and the end consumer on cyber wire fraud because hackers will target anyone in the transaction that is wiring money.
Try to agree in advance who will manage the wiring process. Don't trust bank account details and payment instructions sent via email until they are confirmed in person, if possible, or over the phone, using a trusted phone number. Additionally, consider creating an emergency response plan that establishes what to do and who to contact after a fraud occurs. Typically, both the sending and receiving bank should be contacted, along with law enforcement, and all parties involved in the transaction. Those who act quickly after funds are wired, have the best chance at retrieving all or a portion of the funds.