Real Estate Buyers Beware of Fraudulent Wire Transfer Instructions

Email Fraud and Real Estate Closings

Email fraud in Pennsylvania real estate transactions poses a cruel risk to innocent buyers. And email fraud connected to real estate closings is alarmingly on the rise. The FBI, national title companies and real estate advisers are warning buyers to confirm emailed wire transfer instructions with the settlement agent who is running their closing.

The Scam

The email scam is sophisticated, often successful and increasingly common.

It works like this. Hackers identify email accounts of real estate agents, brokers or other companies involved in real estate closings. Then they hack directly into the accounts and find emails relating to pending closings. Using the chain of emails already sent to a buyer by the realtor or other participants in the closing, the hackers are able to send a very convincing email to the buyer with false wire transfer instructions. The buyer readily accepts the instructions because he or she has already received emails from the apparent sender—  and the hacker’s email contains specific, correct information about the closing and about the property.

The fraudulent instructions direct the buyer to wire monies to an account controlled by the hacker. After the buyer wires the funds, the account is emptied instantly by the hacker.

Protect Yourself

How can a buyer protect against this fraud?

First, the buyer probably has previously received escrow instructions or other preliminary information that identifies the bank where funds will be deposited before closing. Buyers must review their paperwork before following emailed wire instructions. Often fraudulent wire transfers call for transfers to a bank some distance away from the town where the closing is scheduled.

Second, and far more importantly, buyers must speak directly to the settlement agent, by telephone or even in person, and review emailed wire instructions thoroughly before wiring funds. Given the existence of this hacking scheme, buyers simply cannot rely on emailed wire instructions.

Hacking is Common

Sony, Target and the United States Office of Personnel Management have been thoroughly hacked. It’s not wise to assume that the same can’t happen to real estate agents and title agents. Everyone involved in real estate closings must confirm wire transfer instructions by speaking with a responsible person involved in the closing to confirm the bank and account number in to which the funds should be wired.

Impacted? Act Quickly

And for those who are victimized by this scam, it is imperative immediately to cancel the wire transfer with the victim’s sending bank, in writing, with detail that the transfer was fraudulently induced. Equally quickly a scammed buyer must notify the receiving bank in writing that the transfer was fraudulently induced, and instruct the receiving bank to hold the funds pending further investigation. It may be impossible to reverse a fraudulent wire transfer, but a reversal can only occur if prompt written notice is given to both banks. Finally, prompt notice to the regional FBI Office can help stop the movement of funds.

 

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