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New Fraud Trend – Buyers Targeted Week One

Tom Cronkright, Published on May 8, 2019

We are seeing an alarming new trend where Buyers are being targeted the first week after the buy/sell agreement has been accepted. Watch to learn more about this trend and how you can better prepare your company and customers to reduce the threat.

Full video transcript:

Hello everyone, this is Tom with CertifID and I wanted to bring you this fraud advisory as quickly as possible. There’s an alarming new trend, relative to the timing at which buyers are being contacted by fraudsters, and we’re seeing these instances around the country now. So you probably saw recently that the FBI reported that wire fraud in real estate doubled again from 2017 to 2018. And frankly the instances of wire fraud being reported through the IC3, that’s the FBI’s reporting website, were actually $90 billion from June of ’16 to December of ’18. And that covers all wire fraud categories and all industries around the US.

So, unfortunately, it’s a massive problem. It’s continuing to grow and frankly, it’s because the cyber criminals and these syndicates are just making too much money off these scams. So the purpose of this quick video is to let you know that we need, as an industry, to be providing, what I call, a Day 1 Notice. We have to get to the buyers sooner in the transaction cycle to alarm them and notify them that fraud’s an issue. So if you look at a normal workflow from a buyer’s side perspective, and this is assuming a residential loan that has a, I’m sorry, residential transaction with a loan associated with it, you can see there are milestones. And I’m just gonna highlight something here. So when it comes to buyer cash-to-close we’re typically not having that conversation until somewhere around, I’m gonna say conservatively, it’s gonna be in the area of this right here.

You know is it day 17, day 19, through maybe day 22, 23, 24? Sometimes we don’t learn about that until the day of closing when we’re notified, title company’s notified that the buyer’s bringing in their cash-to-close by way of wire transfer. So what’s taking place right now is, you have to understand there’s two significant hotspots that are indicated in the transaction cycle now. The first is when the transaction pends on the MLS. So in this case we have a real estate agent that has an active listing, who accepts a buy-sell with the seller and then ultimately has to move that active listing to a pending status. When that pending status syndicates around the world through all the different websites that pull in syndicated data, that is the deal board for fraudsters.

So just understand that this is what they’re monitoring in real time to say “Oh, looks like, you know, so-and-so, “the Smiths family is selling their house. “I now have, you know, an average of two to three weeks “to try to infiltrate the transaction.” And then the kill zone is where that critical three to five days, between closing scheduled and full disbursement. So what’s happening now, this is the alarming trend, is that we now know of instances where the buyers are receiving communications, the first seven or eight days of the transaction from the fraudster, inserting fraudulent wiring instructions into their inbox. And persuading them to wire either large earnest money deposit transfers or the full cash-to-close transfers. So we’ve seen instances of both now. And this is alarming, ‘cos again, as an industry we’re not looking for, or even having the conversation typically, until the third, closing in on the fourth, week of the transaction relative to the disbursement side. And they have said, “Yep, I know this, so I’m gonna back this timeline up “and I’m gonna have the conversation early.” and they’re actually providing enticements or inducements for them to wire the funds early.

One example, “Hey we’ve got vacations coming up, “if you would wire in your cash-to-close a few weeks early “we can knock off a couple hundred dollars “from your closing fee.” Another example, pursuant to state law, the fraudster says to the buyer, first time homebuyer, “Money has to be received 30 days prior to closing “so we need your wire within the next 48 hours “or we’re not gonna be able to close on time.” So they’re providing examples and they’re threading in some pretty realistic explanations as to why. So looking at this more clinically what we need to do now is we need to provide a proper notice on day one. So we have to say, “Okay buyer, wire fraud’s an issue and it faces you. “You could be the subject of a wire fraud scam and attack. “They’re after your life savings.”

So I’m recommending this Day 1 Alert that at order entry the buyer receives within the first few days a proper notice of the risk of wire fraud, what to watch out for, the things that you will and will not do as a transaction participant, as it relates to bank account information and transfer. And then, refreshing that somewhere between the middle of the transaction and up to closing schedule. Why would we do that? Well, if it’s a first-time homebuyer there are a ton of things that are hitting them in real time here. They’re doing due diligence on the property, they’ve got the lender to worry about, they’ve got, you know, who’s the title company and what do they do? So we want to make sure that as we close in on the instance of where their cash-to-close would be requested that they get a proper refresh right in this time frame here, right as we close in on it. And that’s important in that notice, so what we’ve done with our customers is we have taken not only the alter suggested language but we reverse engineered the court opinions from around the country where the judges and juries in their decisions and their orders are basically saying what should have been done or what could have been done in a timely manner that could have prevented the loss.

So the idea being with a proper notice you’re taking those hotspots and you’re kinda mitigating them down into more of a cautionary state. Because the longer we wait it’s simply a time risk analysis. So, and it looks like this. So if this is time, this curve is risk, and the longer we wait, the longer we wait to have that conversation, the higher the risk profile is going to be not only for your organization but also for your customer and the other transaction participants involved in the deal. Because if you do the work and you provide these proper notices then you’re protecting not only the consumer but you’re protecting the referral partners and the other folks within the eco-system. Quickly on the seller side, it’s very similar. The seller side workflow also has a hotspot when the transaction pends on the MLS and then between closing schedule and full disbursement. But normally the title company kind of bears the weight of this because they have the seller’s funds, I’m sorry, they have the buyer’s funds and new lender’s funds in the escrow account, so the idea here is we have to properly disburse. But the courts don’t distinguish between seller and buyer side fraud alerts, meaning we still have to advise the seller that there’s an issue here.

So a proper alert somewhere between file opening and as we close in on closing schedules is required. So, and the reason there is, the title company all we’re trying to do is mitigate this instance. The title company could receive fraudulent wiring information from the seller’s account either compromised or spoofed account and then the wire for the net proceeds, that’s supposed to go to the seller, doesn’t arrive. And now you have a transaction that hasn’t been fully consummated and that’s a huge problem legally. It’s a huge problem from a title perspective all bad things happen with that scenario. So, I hope you found this useful. Again, I call it a Day 1 and a Day 15 Notice now. We have to be getting to the buyers as quickly as possible and if you want any recommendations or assistance this is exactly the type of thing that we’re doing for our customers here at CertifID. So until next time thanks for tuning in and I hope you have another safe month end. Take care.


    Tom Cronkright

    CEO and Co-Founder @ CertifID

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