Wire fraud 101
Wire fraud is one of the biggest threats to the real estate industry. 2,260 victims of real estate wire fraud were reported to the U.S. Financial Crimes Enforcement Network (FinCEN) in 2020-2021 alone. The total damage? More than $893M.
Why does real estate fraud happen?
Real estate transactions are complex. They involve a lot of money and a lot of people.
And much of the information scammers need to trick you is publicly available on the internet.
On top of all that, the COVID-19 pandemic led to a rapid growth in digital closings without a safety net.
All of these factors make residential real estate transactions especially vulnerable to fraud.
Average number of parties
involved in real estate
transaction
Source: Rocket Mortgage
Median home price in
April 2023
Source: NAR
Growth in digital closings
from 2019 to 2021
Source: ALTA
How does wire fraud happen?
Scammers use “social engineering” — a form of psychological and emotional manipulation — to
trick people into divulging confidential information or trusting fraudulent instructions.
The scammers typically target the home buyer, who wires earnest money and/or cash to close to the title company. But sometimes they also target the title company wiring funds to a broker or seller, or sending a mortgage payoff to a lender.
Here’s what wire fraud looks like in a real estate deal:
Target
Scammers comb the internet for public data about pending real estate transactions and identify a target.
Phish
Then the scammers send emails designed to trick one of the parties into giving them access to their email account so they can intercept their incoming email.
Wait
Now all the scammers have to do is wait patiently for an email that includes legitimate wiring instructions.
Intercept
When the wiring instructions arrive, the scammer intercepts them and replaces them with fraudulent instructions. Using the hijacked email account or a spoofed account (an email address so similar to the real one that most people would never notice the difference), they send the victim the fraudulent instructions, diverting the money into their own account. (This is a type of business email compromise or BEC.)
Steal
Once the money lands in the scammer’s account, they use an elaborate network of money mules to quickly wire it to other bank accounts or use cash, cashier’s checks, and crypto wallets to launder it.
How can you spot a scam?
Mislead
Scammers pretend to be someone you trust, whether that’s a party to the transaction or someone representing an official entity (the Internal Revenue Service, the Social Security Administration, a utility company, etc.). Don’t try to confirm their identity using an email or phone number they provide. Verify their identity independently by finding the publicly listed contact information for the organization they claim to represent.
Misspell
Scammers often misspell words. They aren’t dumb — they’re trying to trick you by making their fake logo, email, or website address (the URL) look like a legitimate one. In one case of wire fraud where the home buyers lost $775k, the scammer used .corn instead of .com to spoof the real estate agent’s email address. They hoped the buyers wouldn’t notice. They didn’t.
Redirect
Be wary of “updated” wiring instructions or any changes to the transaction or closing schedule that you’re not expecting.
Deceive
Be on the lookout for uncommon or formal words like “kindly” and “dear.” Wire fraud scammers are often part of multi-national crime syndicates based in countries where they use British English, which often sounds just a bit “off.”
Defraud
Scammers will pressure you to do something immediately. They don’t want you to think or to verify their story. Don’t fall for this false sense of urgency. What’s the worst that could happen? A closing gets delayed by a couple of days while you separate fact from fiction? It’s better to be safe than sorry.
What should I do if I get scammed?
Unfortunately, your chances of recovering your money are very slim once days have passed, but there are some steps you can take to try to recover your money.
1. Contact your bank
- Ask them to send a fraud alert to the bank that received your wire. Give them all the information you have about the wire transfer, including any reference numbers from the Federal Reserve.
- Request that they contact the fraud department of the receiving bank and place a freeze on the account. Demand that the bank tell you whether your funds are still in that account or where they were transferred.
- If your money was transferred to a third account, repeat this process with the subsequent bank.
2. Contact FBI’s Internet Crime Complaint Center (IC3)
File a complaint with the FBI’s Internet Crime Complaint Center (IC3) using their online complaint referral form. Keep track of your IC3 Complaint Number – you will need to give that to the FBI field office in the next step.
3. Contact your local FBI field office
Contact your local FBI field office. Ask to speak with the agent who handles financial or cyber crimes. Give that agent the IC3 complaint number, explain what happened, and share any other critical information.
4. Contact the receiving bank
In step 1, you asked your bank representative to contact the banks that received the stolen funds. Now, you’ll repeat that step yourself.
- Ask them to freeze the accounts that received funds.
- If the funds have already been transferred out, find out where they were sent and repeat this step with that bank.
5. Alert your insurance carrier
If you’re a real estate professional with E&O, liability, or cyber security insurance policies, alert your insurance carrier.
6. Contact local law enforcement
File a police report. Be sure to save the incident or police report number
7. Contact your security team and/or IT department
If you communicated with the scammer using a business email address or you’re a real estate professional, contact your security team and/or IT department so they can contain the breach and share any relevant findings with you.
How can you prevent wire fraud?
Cybercriminals are smart. You need technology to outsmart them.
Learn more
Visit our resources page to learn more or explore these links.
For home buyers and sellers
For real estate professionals
