Buying a house can be a stressful process to say the least, but usually this is associated with moving out of one property and into another. The endless packing, boxing, unloading and unpacking leaves many vowing to ‘never move again’, only to find their eye is wandering to the next dream property after a few years have passed by. But what if you never even got that far, because criminals were able to steal your money before the transaction was even completed?
This might seem an impossible scenario given all of the security protocols that are in place at financial institutions, but this false sense of security is what the most sophisticated cyber criminals count on, because it means they can catch their victims completely unaware.
Real estate wire fraud is a growing phenomenon where criminals are able to hack into the legitimate conversations taking place between a buyer, their real estate agent and the title company. They can create email addresses which appear to come from those involved in the discussion and can even access critical documents such as the real closing documents. In the final sting, they replace the wire transfer details with their own, so that the buyer simply transfers the money into what they believe is the real account. It is only when the mortgage company calls to ask where the money is that the scam is revealed, by which point the money may well be long gone.
The speed at which the fraud is reported has a significant impact on whether the money is able to be recovered. The bank from which the transfer has been made needs to be notified, at which point they will start their anti-fraud procedures to help recover the lost money. In fact, according to the FBI the high-risk nature of this activity means that criminals are now targeting high end properties in places like New York, Los Angeles and Palm Beach.
A particularly harrowing story was featured on CNBC in which Mr and Mrs Fisher fell victim to real estate wire fraud. Having found their dream home worth $1.4 million which they decided would be the perfect family home for their four sons, Mr Fisher went through all the usual correspondence and even received the final closing documents, which he checked to ensure all of the reference numbers were correct. At this point, he made a wire transfer to the account detailed in the emails, which all appeared to come from authorised parties involved in the sale. A few days later the mortgage company rang to ask where the payment was, to which Mr Fisher explained that he had paid it into their Wells Fargo account. He was told that the mortgage company did not have a Wells Fargo account and that they should ring their bank straight away and report a fraud.
For the Fishers, this was their entire future and had disappeared in the click of a button. In many cases, the money is usually transferred out of the stated account and into foreign accounts where it disappears forever. Thankfully in the case of the Fishers, Bank of America was able to recover the money and it was returned to the family a couple of weeks after the incident took place. In another stroke of luck, their dream property was still available and so they were able to continue with the purchase of the house, which they now live in very happily.
Sadly, the Fishers are not an isolated case and this kind of fraud is growing. As hackers become ever more sophisticated, it is becoming harder to spot the warning signs until it is too late. The FBI reports that around $220 million has been lost to wire fraudsters in 2020 alone which is a 13% increase from the year before.
In order to address this problem, there have been calls for the Federal Reserve to introduce further protections for home buyers to help prevent this kind of fraud from taking place. The Internet Fraud Protection Act bill was put forward by Rep. Brad Sherman as a potential solution although it has been suggested that the reluctance to explore this provision is fuelled by the costs associated with upgrading their computer systems to make the process more robust. The legislation would include the implementation of a wire payment name matching system which is currently being implemented in the UK, where it has been estimated that it could help prevent this kind of fraud by around 90%
Until then, home buyers are urged to remain vigilant when finalizing their purchases. They are advised to pay close attention to emails particularly to tiny changes such as a single letter in the address which often goes undetected. Also, any last minute changes to wiring instructions could also indicate that fraudsters have infiltrated the process. And finally, it is advisable to speak to a trusted member of the chain on the phone to verbally confirm the wiring instructions before going ahead with the transfer.