Wire Fraud and Real Estate Transactions

Wire Fraud and Real Estate Transactions

Be aware! The real estate industry is a target by fraudsters due to the quick pace with a surplus of fund movement on a regular basis. The criminals continue to strengthen their efforts to abscond with buyer, seller and realtor money.  Fraudsters can use online real estate shopping tools to seek out transactions getting ready to close, hack into an insecure email account for one of the individuals involved in the transaction and use that information to send wire transfer details to unsuspecting buyers. When obtaining title insurance, be sure you are aware of your transactions. Consumers and professionals in the industry need to be privy to these types of schemes so they don’t fall victim.


What Exactly is Wire fraud?
Wire fraud is a criminal offense under federal law. It involves any scheme to defraud another person that uses electronic communications, either across state lines or internationally. It is closely related to the federal offense of mail fraud, which involves any fraud offense committed with the use of the U.S. mail or other interstate carriers. The federal wire fraud statute specifically mentions wire, radio, and television communications, but it also includes many fraud offenses involving computers and the internet.

Fraudsters use various methods to get personal credentials and passwords including:

  • Malware: Malware short for "malicious software" is designed to gain access, damage or disrupt a computer without the knowledge of the owner.​
  • Phishing: Phishing is a scam typically carried out through unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.​
  • Vishing and Smishing: Thieves contact bank or credit union customers via live or automated phone calls (known as vishing attacks) or via text messages sent to cell phones (smishing attacks) that may warn of a security breach as a way to obtain account information, PIN numbers and other account information they need to gain access to the account.​
  • Accessing Email Accounts: Hackers gain illicit access to an email account or email correspondence through spam, computer virus, and phishing.

Click here to see expanded information about these Phishing methods.
 

What to do if fraud happens  
If you suspect a fraud is underway or has happened, act immediately! Contact as many people as possible at your management team as well as at the title company. The bank and FBI need to be contacted immediately among other steps that must be taken. 

  • Best Practices for Victim Response and Reporting of Cyber Incidents
    The Cyber Security unit of the Department of Justice has published the following guidelines for reporting cyber incidents: Click here
     
  • Complaint Referral Form by the Internet Crime Complaint Center: Click here


Check Out This Short Video Explaining 
Wire Fraud in Relation to Real Estate Transactions

 

Ways That Real Estate Agents Can Help Protect Their Customers From Wire Fraud

  1. Consumer Education
    The biggest key to prevention is education of your customers. Take the time to explain that wire fraud has become prevalent and explain how we, the title company, will deliver wiring instructions. Buyers and Sellers should understand that if they receive a phone call, fax or email regarding wiring of funds, they must call a previously validated title company phone number to verify the funding information. Always caution the client about contacting the title company from an email signature. Criminals have become sophisticated at sending fraudulent communications pretending to be the Realtor, the title company and the lender.

    Wire Fraud Criminals send emails with identical looking signature blocks of one of the parties to the transaction but replace the phone numbers with ones the criminal will answer if someone calls. A good tip is to ask your clients to program the title company phone number into their cell phones when they go under contract or even at listing. This way they are calling us on a trusted phone number and not from any other resource that might be fraudulent.

    Buyers should be forewarned by their realtor that no one in the transaction should send them wiring instructions other than the title company. Even when the title company sends wiring instructions it should be only upon request from the customer and the customer should never initiate a wire without personally calling the title company from a verified phone number to verify the wiring instruction data.

    A realtor should never take on the responsibility of sending wiring instructions to their clients. Wire instructions should only be sent by the title company.  After having the wire fraud phone or in-person conversation with your client, agents should (1) have their clients sign a disclosure regarding wire fraud dangers, (2) send them an email confirming your conversation about wire fraud and (3) ask your clients to reply back to your email acknowledging that you have discussed all the issues involving wire fraud with them.  These are recommendations from defense law firms for what they need to properly defend agents if their clients are the victim of wire fraud and decide to sue their agent.

    On the seller side of the transaction, you should counsel the clients to bring a physical copy of their wiring instructions to closing. The sellers should not email their account information. Instead they should bring the instructions to closing. All sellers should be counselled to not respond to email inquiries requesting their account number or wiring information.

    Also, make sure that we have your buyer or seller’s phone number. When we receipt the contract we will call your buyer and seller to talk to them about the transaction. We will reiterate the warnings that you are giving them and we will help remind them how important it is to follow our instructions.
     
  2. Contacts Log
    Before you go under contract create a log of all approved parties’ phone numbers to give to your buyer or seller. Providing the clients with a verified phone number to use at the beginning of the transaction is a must. Programming the title company number into their phone should help minimize the possibility of a fraudster sending them a different phone number to use via email.
     
  3. Confirmation of Wire Instructions for Realtors
    Many realtors today have a portion of the commission wired. If you fall into that group make sure you are available by phone to verify the wiring instructions. Criminals are hacking emails and sending in fake wiring instructions for commissions too!
     
  4. Two-Factor Authentication
    Implementing Two-Factor Authentication for your email and all applications requiring a login is extremely important.  All parties to the transaction, especially real estate agents, should be encouraged to enable Two-Factor Authentication on the email service they utilize. This site lists systems that implement Two-Factor Authentication: https://twofactorauth.org. After you have turned on your Two-Factor Authentication make sure to change your password one time to clear out any prior access.
     
  5. Secure Email
    All email involving nonpublic, private and confidential client information should be sent utilizing secure email systems. Here is an article from NAR regarding NAR Best Practices. 
    www.nar.realtor/articles/internet-security-best-practices
     
  6. Cyber Protections
    Realtors should implement industry standard IT security and cyber protections of their email and computer systems including but not limited to: 1) utilizing strong antivirus software, 2) installing security patches for all operating systems and software applications, 3) logging out or locking their computer when leaving their computer unattended, 4) avoid clicking on suspicious links on websites or within emails and 5) avoid using free WIFI or free charging stations. Free WIFI pretending to be legitimate businesses is often operated by criminals and allows them to access everything being transmitted over WIFI.

 

Additional Resources to Share

  • Wire Fraud and Cyber Crime in Real Estate, A Video by TNT | Click here
  • Phishing Scams, An Educational Flyer by TNT | Click here
  • Texas Land Title Association (TLTA) Cyber Fraud Resources | Click here