Real Estate Fraud: What Buyers and Sellers Need to Know

When you’re preparing to buy or sell your home, you already have a lot on your mind, including all of the new experiences and opportunities moving to a new place will bring and the legal and financial steps you need to take.

While we all have read a lot about all of the closing paperwork and mortgage approvals that need to be done, there should be another important item on your to-do list: being prepared for the rising threat of real estate fraud.

So just what exactly is real estate fraud, and why should you be ready to mitigate it? And, perhaps most importantly, what can you do to prevent falling victim yourself?

What is real estate fraud?

There are two main forms of real estate fraud that you and your real estate professionals need to be aware of: mortgage fraud and wire fraud.

Mortgage fraud typically involves a person intentionally making materially false statements or positions in order to obtain a mortgage loan or ownership of a property.

Wire fraud involves a form of business email compromise where a criminal convinces a victim to wire money into what they believe is a legitimate account.

While both can have devastating financial consequences, it’s the threat of wire fraud that most real estate buyers and sellers need to watch out for.

What do I need to know about real estate wire fraud?

Unless you are in the real estate business, it’s likely that you haven’t heard much about this form of wire fraud.

Here are three key facts that you need to know:

1. It’s more common than you think

Nearly one-third of all 2020 wire-based transactions included scam attempts, with real estate and title firms increasingly seeing their work being targeted by cybercriminals.

In fact, according to a study by the American Land Title Association (ALTA) on real estate wire fraud, 76 percent of title agents reported that wire fraud attempts have continued or increased in the last two years.

Unfortunately, according to the same ALTA study, when wire fraud has been successful, nearly 71 percent of the stolen funds could not be fully recovered.

2. Criminals have multiple methods to exploit the process

While the rise of email, text, and web portals has eased the process of preparing paperwork for a sale and closing, these digital tools have also opened up new risks that need to be mitigated.

For example, criminals have been able to:

• Create fake web portals that match legitimate lenders or mortgage companies so customers are tricked into submitting paperwork to fraudulent destinations.
• Gain unauthorized access to fax machines to intercept or alter paperwork involved in the closing process.
• Execute business email compromise to interrupt and intercept the legitimate sharing of wire transfer data between buyers, sellers, and title companies.
• Commit identity theft through phishing or malware, targeting victims with poor cybersecurity hygiene. 

3. There are tools available to secure your transaction

Just as cybercriminals have developed new ways to pull off wire fraud, there are now strong, industry-leading tools available to help customers and real estate professionals fight back.

One of the most effective is utilizing a platform such as CertifID that introduces end-to-end encryption to create a secure session to verify parties involved in a wire transfer and collect their financial account data.

Using this platform can:

• Prevent sensitive data from being shared through unencrypted or unverified channels.
• Allow real estate professionals to easily integrate a more secure account data collection mechanism into the closing process and existing workflows.
• Introduce the support of a trained team available to help in the event that wire fraud does occur.
• Back each transaction with the peace of mind that comes with being insured by Lloyd's of London up to $1 million.

Fight back against wire fraud

Buying or selling a home should be a time full of excitement and anticipation of new experiences. Unfortunately, cybercriminals have continued to evolve their tactics to threaten the financial future of all those affected by real estate wire fraud.

Fortunately, with the right security practices and industry-leading wire fraud prevention tools, your business can play its part in keeping your customers safe and your hard-earned brand reputation intact for years to come. 

Want to make sure you and your real estate team are doing everything they can to ensure they are keeping your transaction safe? Then make sure to check out our comprehensive resource, Cybersecurity Measures You Can Implement To Protect Your Real Estate Business.

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