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Wire Fraud Warning Signs in Real Estate Transactions and Closings

There has been an explosion in the criminal targeting of real estate closings through the use of hacked email accounts to send fraudulent instructions to transfer large amounts of money intended to purchase real estate into the criminals' accounts, rather than into the legitimate accounts intended by the parties. The imposters impersonate people involved in the closing transaction via email to gain trust and orchestrate the fraudulent transfer.

According to the National Credit Union Administration or NCUA, the FBI reported a 480 percent increase of reported real estate wire transfer scams in 2016. The NCUA explains the vulnerability of real estate closings to such crimes:

  • The process by its nature is "often hurried," with pressure to meet deadlines.
  • Email is the normal channel used to send instructions for transferring large sums, so the fraudulent instructions do not stand out as abnormal.

Take protective measures

Lenders, financial institutions, real estate agents, mortgage brokers, closers and title companies must take strong steps to protect themselves, their clients and customers from such fraud by consulting with security experts about engaging cutting-edge technology such as the use of encryption as well as establishing internal safety processes and practices throughout the electronic transaction like requiring passcodes and confirming transactional details via telephone or face to face.

Everyone involved in a real estate transaction should be on guard and aware of the signs that could signal an attempt to hack into communications. Signs could include irregularities such as misspelled words or poor writing, modifications to account numbers or communications at odd hours, warns the NCUA.

According to Housingwire, much of the wire fraud in real estate transactions is "international in nature, and generally involve[ing] multiple perpetrators." It behooves everyone in the industry to exercise extreme caution to prevent related losses.

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