Make the Call! Avoid Wire Fraud in Real Estate Transactions

Wire fraud in real estate has reached epidemic levels in recent years. Tech savvy thieves are reviving old fraud schemes to steal millions of dollars from unsuspecting parties in real estate transactions. Losses from wire fraud in real estate transactions exceeded $56 million in 2017, and authorities expect losses to increase in coming years. Cybercriminals continually change their techniques to avoid detection, and work around cybersecurity measures aimed at reducing wire fraud. Unless and until the real estate industry adopts new, more secure methods for transferring funds in connection with real estate transactions, wire fraud will remain the ugly elephant in the room at real estate closings.

Cyber criminals use email correspondence and phone calls to impersonate one party in real estate transaction to trick another party to the same transaction into using fraudulent wire instructions. The criminals pose as a trustworthy source (an attorney, a real estate agent, title company representative, etc.) to create the appearance of authenticity, legitimacy, and security. Usually, the party on the receiving end of the email or phone call is planning on wiring funds for an upcoming real estate purchase or sale. Because the instructions are somewhat expected and appear to be from a trusted source in the normal course of a real estate transaction, the unsuspecting party usually accepts the instructions at face value and initiates the wire transfer. By the time the ruse is uncovered, it is often too late to secure the return of any or all funds.

Parties to a real estate transaction can reduce the risk of falling victim to wire fraud by employing a few simple, time-tested means of independent authentication and verification prior to initiating a wire transfer. A party to a real estate transaction should only accept wire instructions that flow directly from a request initiated by that party. Title companies and brokerages do not send wire instructions unless requested to do so. A request for wire instruction should always start with a phone call to the company who will ultimately receive the funds. The telephone number for the receiving company should be independently verified. Most reputable real estate-related companies have telephone numbers listed on their website, and are included in telephone directories. A Secure delivery method, like fax or encrypted email, should be used to transmit wire instructions. Even with secure delivery, wire instructions should always be verified over the phone with the receiving company prior to initiating a wire. Companies rarely change their wire instructions during the course of a transaction. So, if any new wire instructions are received after verbal confirmation, they should be independently verified with the receiving company before any funds are wired through. After initiating a wire, the receiving company should be informed of the pending wire, and confirmation of receipt by phone should be requested.

If you suspect that you have been the victim of wire fraud, contact your bank, the receiving company, and the appropriate authorities as soon as possible. Every minute counts when it comes to wire fraud

For any questions regarding any or all real estate matters, you can contact Kevin Mitrick at 312-332-7555 or kmitrick@lavellelaw.com.