In 2014, FBI statistics relating to a sophisticated business email scam showed close to 1,200 people in the U.S. lost some $180 million — and their real estate agents were unknowingly involved. Fast forward to 2021, and this scam is still an issue. In fact, it’s increasing. Since the best defense is the right information, here’s how to avoid the email compromise scam in real estate.
Here’s how it works. Scammers hack into a lender or title company’s email server and/or computer system to search for pending real estate closing. Step two is to create fraudulent email accounts to pose as the buyer or financial institution. Emails are sent from these imposter accounts with instructions for wire transfers related to the relevant closing. When the buyer or financial institution follows the instructions and the funds are wired, that money is gone and the scammer vanishes.
In most instances, the fraud comes to light when the closing agent or title company inquires about the anticipated funds — the ones they didn’t receive. Can you imagine?
There are a number of procedures and protocols that can help prevent against this heartbreaking scenario. First, all email communication from a professionals should be from company email accounts instead of free, web-based email clients like Gmail or Yahoo.
Title companies should always use encrypted emails, and arrangements to verify wire transfer instructions emails should be made via confirmed phone numbers. Passcodes established between buyers, agents, and title companies can serve as additional verification.
If you find anything suspicious about an email — poor grammar, spelling errors, strange sent times, or any sense of urgency, as well as those directing changes in payment type — contact your agent and title company before doing anything further.
Simple awareness of the existence of the email compromise scam is helpful. If your closing agent or title company doesn’t bring it up, ask directly about the steps they’re taking to ensure your wire transfer is safe. And share this post — it’s the kind of thing that everyone should know about.