Purchasing a new home or piece of property can be a very exciting time for the buyer, and as a real estate professional, you are, of course, happy to be part of the process. But when what could have been another successful and happy closing is thwarted because of real estate fraud, the situation becomes a nightmare for all parties involved.
Real estate fraud comes in many forms, and when it occurs, it isn’t just the buyer that has lost money or the home — escrow officers, real estate agents, and title company representatives can also be affected. Such was the case with an escrow officer in Tacoma, Washington who luckily managed to figure out a scam on the part of a fraudulent buyer before it could come to fruition, saving the title company from serious financial damage.
Unfortunately, many scammers and cyber criminals often do succeed in their efforts, costing their victims millions of dollars and ruining the dreams of many home buyers.
Through a combination of sophisticated schemes utilizing today’s advanced technology and old-school methods, scammers and cyber criminals are targeting the real estate industry more than ever before. That’s because a great deal of personal and financial information is exchanged between the parties involved in a real estate transaction, and the high dollar amounts also make it particularly enticing to criminals.
Differing from identity theft, a common tactic of scammers is to assume the identity of a buyer, seller, or real estate professional, for the sole purpose of acquiring funds illegally. For example, a criminal might acquire the credentials of a legitimate agent and provide instructions to the buyer to deposit earnest money into an account. The funds are then stolen and the fake agent is never heard from again.
In other cases, such as the one in Tacoma, it was a fake buyer who attempted the fraud. And quite often, a thief uses identity information to illegally take possession of the title of a property, and then borrow against it or sell it. And still others will impersonate a broker and target homeowners who are struggling to make their payments, subsequently engaging in foreclosure fraud.
There are a variety of ways in which a criminal might manage to hack an agent’s account or steal a buyer’s personal financial information. One method is phishing emails, which account for over $50 million in losses from victims each year. Phishing emails are cleverly designed emails that appear to come from a trusted source, and trick the unsuspecting recipient into providing personal information that the criminal can then use to gain access to one or more private accounts. Including email accounts and bank accounts — all that is necessary for a criminal to engage in real estate fraud.
Other times it is just simple human error that provides a criminal with the information they seek. A common example of this is signing into a private account while using public Wi-Fi. You never know when the person sitting a few tables away in a coffee shop is using a device to illegally record all the data being transmitted from others in the shop over the public Wi-Fi.
There are several cyber security protocols you should follow in order to keep both your own information and that of your clients safe and secure. One is to simply remain vigilant and careful about where you access sensitive information. Another is to train yourself and others in your employ to watch for and detect phishing emails.
By ensuring that you and others in your organization are careful and do not respond to phishing emails, you can prevent many attempts of cyber criminals from gaining access to your email accounts or other private data.
Avoiding downloading files is another way to reduce the risk of fraud or identity theft. Many individuals often utilize their work computers or devices to download files such as movies or music, or to visit websites that are not work-related. But many of these websites and files can contain hidden programs called malware, which infect a computer unbeknownst to the owner, and can easily transmit sensitive account information back to a cyber criminal.
Using anti-virus and anti-malware applications on your computers and mobile devices can help prevent cyber attacks by detecting and removing malware before it has a chance to infect your computer.
And because many types of real estate fraud focus on the exchange of earnest money deposits and other financial transfers, you can significantly reduce the risk of fraud by using a secure electronic money transfer platform. Money transfer platforms are an ideal method for real estate professionals to use for earnest money deposits as well as closing costs.
In addition to being more convenient than checks and bank transfers, an ACH transfer platform, such as paymints.io, is also extremely secure, using the same high level of security and encryption as top banks. This particular secure money transfer platform also engages in strong ID verification and transaction tracking, ensuring that the parties involved in a money transfer are exactly who they say they are and that the money gets to where it is supposed to go.
In the case discussed earlier that occurred in Tacoma, one of the red flags that tipped off the escrow officer that something might be fraudulent was the check for the closing funds, which did not actually contain any information pertaining to the issuing bank.
Following protocol, the escrow officer stated that the check was not acceptable, and that the buyer would need to provide a cashier’s check or provide the closing costs via an ACH transfer.
While the buyer, who was, of course, actually a scammer, left, the escrow agent continued to research the check and discovered that it was actually fraudulent. This is a scheme that occurs all too often and is unfortunately not always detected. Cashier’s checks can also be easily forged or faked, leading to further incidents of real estate fraud.
Had the escrow agent been using a secure money transfer platform from the onset of the real estate transaction, it is likely that the attempted fraud would have been discovered much sooner.
Preventing real estate fraud starts with you, and those in your organization. By following some simple, common-sense cyber security protocols and watching for red flags during real estate transactions, as well as using advanced and secure technology to further minimize the risk of fraud, you can ensure safe transactions for your organization and your clients.