A cautionary tale for anyone involved in a real estate transaction
Imagine, if you will, that you’re about to purchase a new home. You and your family are full of anticipation… maybe it’s your dream home, or maybe you’re downsizing into the perfect place that will allow you to travel more and worry less. Whatever the case may be, it’s an exciting time and you’ve been eagerly awaiting the closing date. All the contingencies are satisfied—anything that could potentially derail the deal is behind you. Smooth sailing to the closing.
Let’s also assume that you, the buyer, are making some form of a down payment on your new home. Maybe you’ve recently sold a property and have 10 to 20 percent to put down. Or maybe it’s your first home and you’ve managed to save up 5 percent. Whatever the case may be, there’s money in your account earmarked for your new home purchase. As your closing date approaches, you receive an email from your settlement company—the company YOU have chosen to handle the closing—giving you instructions for how to wire those funds directly into the settlement company’s account in preparation for your closing.
So naturally, you do. Over the past few months, you’ve been asked for documents, you’ve been told where to sign, you’ve been given instructions on what to do… you’ve been trained to do as you’re told. The problem is, that last instruction—the email that looked exactly like every other email from your settlement company—was actually from a hacker. They copied your settlement company’s email signature exactly. And it turns out they’ve been watching your transaction for a while now, waiting for the perfect moment to jump
in unnoticed.
This scenario is playing out with alarming frequency across America, and buyers and sellers in our area are being affected just as often. Once the buyers’ funds have been wired to a fraudulent account, that account is emptied and closed and the funds are gone—often never to be recovered. Unaware, the buyers arrive for their closing at the appointed date and time, only to find out the email they thought was from their settlement company was bogus. Their down payment money is gone. And not only have they lost all their savings, but now they also can’t close on their new home.
The entire basis of this fraud is one party receiving wiring instructions from another party they already trust and recognize. The scheme is insidious for a number of reasons: first, there are multiple parties involved in a real estate transaction, and only one of them needs to be hacked in order to get the necessary info. Second, the wire transfer is initiated by the person whose money it is, so their bank is simply following instructions. Finally, it preys on people by providing instructions they expect, at the exact time they expect them. If you think it can’t happen to you—that you’re too smart to fall for such a scheme—you might want to reconsider.
A prior iteration of this fraud involved hackers providing wiring instructions via email to settlement companies. These emails would appear to be from either the sellers themselves, or in some cases the seller’s agent. The email would instruct the settlement company to wire the seller’s proceeds from the sale to a bogus account, at which point all the funds from the sale of the property would be gone.
Once word spread of this strategy, settlement companies and attorneys quickly adjusted their practice and no longer accept wiring instructions from sellers or agents via email. As that stream of income dried up, hackers adjusted their tactics to prey on buyers instead.
The effects of such a scam are devastating, and finding those responsible is tricky. It’s likely that these hackers are overseas, and they are numerous. Many believe there are thousands of individuals, each watching hundreds of real estate transactions at a time. They are savvy and they are patient. And every day, at just the right time, they insert themselves into a transaction completely undetected.
This warning goes out to home buyers, home sellers, real estate agents, title companies, settlement agents and attorneys: if you are in the midst of a real estate transaction, or if you know anyone, anywhere, who is, please DO NOT accept any instructions via email to wire funds ANYWHERE. Call your settlement company or attorney. Go to their office in person if necessary. If you are a buyer, and it is at all possible, do not wire funds at all. Bring a certified check directly from your bank to the closing. If you are a seller, make sure the company handling the closing knows exactly how you want the proceeds from the sale of your property to be handled.
