5 Stories Detailing how Cybercriminals have Defrauded Real Estate Transactions
Wire Fraud schemes continue to plague the real estate industry regardless of the numerous news articles published, warning buyers and sellers of the risk and the educational materials advising real estate professionals to establish preventative measures. In 2021, the FBI Internet Crime Complaint Center reported 19,954 victims and $2,395,953,296 in victim losses for all business email compromise crimes. Below are some real stories of people who became victims of real estate wire fraud.
Young Couple in California
$921,235.10
The couple found their dream home in Northern California listed at $1.4 million. Thanks to recent family inheritance, they only needed a small mortgage and could pay the rest in cash. The couple was emailing with their real estate agent and the title company about the transaction. They received an email with the closing documents, so the couple reviewed the documents and confirmed all of the numbers were correct. Attached to the same email were wire instructions, so the couple wired $921,235.10 from their bank account to an account at Wells Fargo. Two days later, the lender called asking where they had sent the wire. When they replied that the funds were wired to a Wells Fargo account, the lender told the couple to call their bank immediately because they did not have an account with Wells Fargo. By the time the couple contacted their own bank and Wells Fargo to file a fraud claim, their funds had already been wired out of the Wells Fargo account, into an account in China.
Two weeks later, they bank called the couple. They were able to get all of their money back. While the bank declined to discuss specifics about how they were able to return all of the money, they did advise that as soon as the couple filed a claim, the bank took quick action to recover the funds and due to their immediate action. Fortunately, the couple’s dream house was still on the market, so they were able to continue with their transaction – this time, using a certified check that they carried directly to the closing table.
First Time Homeowner
$42,000
After saving up for years to become a homeowner, in 2021 a young woman in Chicago had enough saved to for a down payment of 20%, which totaled $42,000. She was advised by her real estate agent’s paralegal that they would send her wire instructions the following week; however, she received the wire instructions later that same day from what appeared to be the paralegal’s email address. The email advised that the funds needed to be wired sooner than expected. Nothing within the email made the woman feel suspicious, as the email stated the correct down payment amount, the correct property address, and had her actual mortgage commitment attached. The woman replied to the email asking clarifying questions, which were promptly answered. In total, there were 16 emails back and forth between the young woman and who she though was the real estate paralegal. Later that day, the young woman went to the bank and wired her $42,000, using the wire instructions had received via email.
The following Monday, the young woman received a call from the paralegal, asking about the down payment. The woman replied she had already sent the wire after receiving the paralegal’s email. The paralegal advised she had not emailed the wire instructions yet. The young woman opened her email correspondence about the wire and examined the email address of the sender. The sender’s email address looked almost exactly like the paralegal’s email address, but it had two extra characters. This is when the young woman realized she had become a victim of wire fraud and her entire down payment and years worth of savings was gone.
By the time she contacted her bank, they were able to put a stop payment on $9,000 of her $42,000 down payment; however, it took over a year, and a request for comment from a news outlet, for the bank to deposit the $9,000 into her bank account. Fortunately for the young woman, her parents were able to assist her with her down payment so she could still purchase her new home.
Woman in West Palm Beach
$22,890
Days before purchasing her first house, the house she was currently renting, a 25-year-old woman in West Palm Beach received an email from her attorney’s paralegal. Attached were wire instructions for her $22,890 down payment and closing costs. The woman wired the funds, which was her entire life savings, immediately, as directed. The next morning, her attorney declared they never received any funds and the email she had received was from a scammer.
With all of her money gone, the woman was concerned that she would end up homeless, unable to continue with the sale and unable to continue renting the property. She contacted her bank to report the fraud, within 12 hours of sending the wire. Fortunately for her, all of her money was recovered because the funds were still on hold and had not been routed to the scammer’s account yet.
Man in Kentucky
$70,000
A man in Kentucky received an email from his closing attorney, encouraging him to wire the deposit funds in order to “avoid delay” with closing. The man did not find anything about this email suspicious because he had received several other emails from the same sender earlier in the transaction. He promptly wired more than $70,000 using the wire instructions he received.
At the beginning of the transaction, the man was directed by his realtor, to call immediately after sending the wire. While on the phone with the realtor, they discovered that the email requesting the funds be wired immediately, was not sent by the closing attorney. Upon learning this, the man got into his car and drove directly to his bank. The bank advised that the funds had already been wired.
When the man returned home with the bad news, he reviewed the emails - wondering how he was fooled. After analyzing emails, he noticed that the email with the wire instructions looked identical to the emails that were actually from his attorney. The scammer used the attorney’s actual logo, company letter head and email signature. He finally noticed that the email with the wire instructions was sent from an email address that was one character different from his attorney’s actual email address. The attorney’s actual email address had the word "Louisville" but the scammer's email address misspelled "Lousivile", using one "L", instead of two.
Five days later, the man received word from his bank that his funds were returned to his account and he was able to proceed with purchasing the house.
Single Mom in Texas
$40,000
A single mother spent years saving as much as she could to purchase a house. She was finally able to find a house that she could afford and her offer was accepted. It wasn’t until she was at the closing table and the Title company was asking about her $40,000 for the down payment and closing costs, that the single mother realized something was wrong. The mother had received an email prior to the closing requesting she wire the $40,000. She called her lender in tears, since she had worked her whole life to save up for “the American dream”. The lender was able to re-work the mortgage so she could purchase the house; however, her $40,000 was already gone. Her family has set up a Go Fund Me account to try to make up for her lost savings.In the above stories, each victim received an email with fraudulent wire instructions yet none of them noticed anything suspicious about the emails before sending their wire. Typical scam emails are filled with typos and grammatical issues; however, when there are hundreds of thousands of dollars on the line, the fraudsters spend time making their emails look legitimate. These emails are targeted, well-crafted, spoofed emails that actually look like they are from the title company or attorney's office involved in the transaction. Additionally, scammers are increasingly using COVID-related excuses to make their messages seem more urgent. For example, the email may say, "Because of COVID we're short staffed so you need to send the wire today", or the email may mention outbreaks at the office, local lockdowns and other timely pandemic issues that require the wire be sent immediately.
As real estate professionals, it is crucial to advise consumers of the risks of wire fraud at the beginning of the transaction, and it would be wise to remind them the closing date nears. Advising clients to confirm the wire instructions before sending the wire, either in person or using a trusted phone number, is an excellent yet simple preventative measure that would have saved each of the victims above. A trusted phone number could either be a pre-determined number or a company phone number found by Googling the company or visiting their website.
Additionally, consider establishing an emergency response plan that details what to do and who to contact if wire fraud occurs. The sooner the bank is contacted after a wire to a fraudulent account is initiated, the higher the likelihood that the funds will be stopped and returned to the consumer. According to a 2021 ALTA Wire Fraud survey, of approximately 550 title agents, a full recovery of funds was only possible in 29% of wire fraud cases and in 40% of wire fraud cases, less than 10% of funds were recovered. Of the companies that were able to recover funds, 58% started the process by contacting the bank, highlighting the need to work quickly to report the fraud to the financial institutions and report all criminal activity to the FBI's Internet Crimes Complaint Center (IC3). In 2020, the FBI's IC3 Asset Recovery team were successfully able to freeze approximately $380 million of the $462 million reported in losses.
The scammers are becoming more skilled at tricking consumers and will continue to do so. Therefore, implementing preventative measures, an emergency response plan and advising clients to be aware of scammer emails is imperative for preventing wire fraud from happening.