In 2017, my wife and I became victims of real estate wire fraud when we sold our house. Cybercriminals changed the mortgage payoff wiring instructions and the title company wired $239,000 into the criminal’s bank account instead of our mortgage account.
After a very stressful eighteen months, the matter was resolved when the title company’s E & O carrier paid the mortgage balance. (Watch this video to learn how the hackers stole our mortgage payoff.)
I vowed to help home buyers and sellers avoid becoming wire fraud victims.
I educated myself on how real estate wire fraud occurs and how to avoid it. It is now my practice to incorporate a wire fraud discussion into every consultation with buyers and sellers.
All real estate agents should do the same thing and here’s why:
Most buyers and sellers do not read the wire fraud warning in email footers, leaving them vulnerable.
Most buyers and sellers do not read or understand the wire fraud disclosure included in offer packages.
One in three real estate transactions is targeted by wire fraud criminals [ALTA 2021 Wire Fraud Survey].
It’s very difficult to recover wired funds once diverted to criminals.
Losing a deposit, down payment, closing funds, proceeds, or a mortgage payoff can cause irreparable financial hardship to buyers and sellers.
Real estate agents have a unique relationship with buyers and sellers. Agents are trusted advisors and buyers and sellers will follow their guidance.
Discussing wire fraud and how to avoid losing money will set the agent apart from their competitors. It highlights the agent's industry expertise and genuine concern about their client's financial well-being.
Informing prospective clients about wire fraud leaves a strong impression and I typically discuss it at the end of my consultation. Everyone has thanked me for educating them.
Here is a suggested script for real estate agents.
Wire fraud script for buyers
"There’s one more thing I need to discuss with you and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about and neither do a lot of real estate agents. I want to talk about real estate wire fraud.
Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff.
Here’s how it happens.
As a buyer, you pay a deposit and down payment. When these funds are wired to the attorney’s office or title company, there’s a risk that the money could be diverted to a criminal’s account if certain precautions aren’t taken.
Here’s how the funds could get stolen.
Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office, or even the title company.
If the criminal finds the wiring instructions for your deposit or down payment, they would change the account number where the funds will be deposited. They would then email you revised wiring instructions from a fake email address that is similar to one of the parties in the transaction.
If you didn’t notice the revised wiring instructions were fraudulent and you wired your money into a criminal’s account, the odds of recovering the money are very slim.
When we get close to writing up an offer, I will walk you through some simple procedures to protect your money. Do you have any questions?"
Wire fraud script for sellers
"There’s one more thing I need to discuss with you and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about and neither do a lot of real estate agents. I want to talk about real estate wire fraud.
Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff.
Here’s how it happens.
As a seller, your proceeds will be wired into your bank account by the title company or settlement agent. Several days before the closing, the title company, settlement agent, or attorney will ask you to provide wiring instructions for your proceeds. If you email this information, you are exposing yourself to wire fraud.
Here’s how your proceeds could get stolen.
Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office, or even the title company.
If the criminal finds the wiring instructions for your proceeds, they would simply change the account number to where the funds will be deposited. The criminal would then email their revised wiring instructions to the person who will wire the funds. Their email address will be similar to your email.
Not only are your proceeds at risk, so is your mortgage payoff. Your mortgage balance will be paid at closing. If that payment is wired, it could be stolen.
Before closing, you’ll be asked to contact your mortgage bank and obtain a mortgage payoff letter. The letter will include the mortgage balance and wiring instructions.
If hackers obtain the payoff wiring instructions, they will change the account number from your mortgage account to their bank account. They will then send the wiring instructions to the party who requested it. That may be your attorney, someone at the title company, or settlement agent.
Once the money is wired into the wrong account, the odds of recovering it are very slim.
I know this is alarming information. However, after you find a buyer and we have a firm closing date, I will walk you through several simple procedures you can follow to ensure your money is protected. How does that sound?”
Advice during the transaction
While some sellers and buyers use bank checks, most use wire transfers. If you practice the above script, you’ll become comfortable explaining real estate wire fraud to your prospects.
Once a transaction is moving forward, here are best practices to share with your client about wire transfers –
Confirm wiring instructions by phone. Call a known number before transferring any funds. Don’t call phone numbers or click links from an email.
Be suspicious of any emails that include changes in wiring instructions and payment information – title companies don’t usually communicate that information via email.
When responding to an email, hit forward instead of reply, and type in the recipient’s email address. This can clarify whether an email came from a fraudulent, spoofed source or the legitimate email address.
Ask your bank to confirm the name on the account before sending a wire transfer.
As soon as a wire transfer is sent, call the recipient to verify that the funds have been received.
Sellers with mortgages, should call their mortgage lender immediately after closing to confirm the mortgage payoff was received.
The sooner a consumer detects that their money was sent to the wrong account, the greater the likelihood the money will be recovered.
If it is discovered that someone in the transaction wired money into the wrong account, it's imperative to act quickly. The following steps should be taken immediately:
Report the fraudulent wire transfer to the sending and receiving banks.
Contact the sending bank’s fraud department and initiate a swift recall on the wire. Request a recall of the wire be sent to the receiving bank. Provide the wiring details and ask the bank to alert all other banks that may have received your funds to place a fraud alert or security hold on the funds so they’re not withdrawn or transferred to another account.
Request the bank initiate the FBI’s Financial Fraud Kill Chain.
Report any fraudulent activity to the FBI via its Internet Crime Complaint Center – www.ic3.gov and call your local FBI field office to assist in the recovery of your funds.
Inform all parties in the transaction of the fraud, including the title insurance carrier.
As real estate agents inform their prospects and clients of wire fraud and how to avoid becoming a victim, the incidents of wire fraud will decline.
If you have any questions or wire fraud stories you'd like to share with me, please contact me at richard.hopen@compass.com.
Rich Hopen worked closely with ALTA to create www.stopwirefraud.org. He also: sat on a wire fraud panel with a U.S. Senator; participated in a roundtable discussion with the FBI, ALTA, the Mortgage Bankers Association, American Bankers Association, and NAR; was interviewed and quoted by HousingWire and the Wall Street Journal; and has spoken to many real estate offices and organizations.