Is a real estate buyer liable for wire fraud?

You’re just a few days away from closing on your new home. You receive and email from your title company, lender or lawyer with directions for wiring your down payment and closing costs. You wire the money, but the title company never receives the funds. What happened? Real estate wire fraud. It's been a problem for years. With a third of all real estate transactions experiencing some type of wire fraud attempt, it’s vital that consumers protect themselves.

How Does Real Estate Wire Fraud Work

​The scam works like this. A fraudster gains access to an email account attached to a home sale. It could be a lender, a real estate agent, the buyer, or a title agent.

The scammer then monitors the emails, watching as the transaction progresses. Then when the time is right, they insert themselves into the conversation.

Unlike other spam email which has obvious misspellings and awkward wording, these fraudsters are very careful about crafting an email that looks and reads as if it’s coming from an authentic source.

According to Andy White, CEO of ClosingLock, a company which helps Title Companies prevent wire fraud, “These are targeted, well-crafted spoofed emails that look like they are from the title or escrow company or attorney office. When there are hundreds of thousands or millions of dollars on the line, you can bet the fraudsters will take a little time to make these emails look legit.”

What’s more, real estate transactions have gone through the roof in recent years and consumers are more comfortable with online transactions. If a buyer receives an email requesting funds, she may think that is how the system works.

It isn’t.

So Who’s Responsible When Real Estate Wire Fraud Occurs?

​The short answer is it could be you. Many people erroneously believe that the bank will eat the wire fraud cost. Not so.

Banks do cover a compromised debit card because the law states you are not liable for that loss if you report it in a timely manner.

Real estate wire transfers, however, are not unauthorized. You, the consumer, initiate the transfer of money. The bank is not responsible for ensuring you have good account information or that you are following fraudulent instructions.

Cases such as these often come down to a court decision. A variety of people—from real estate agents to the buyer—have been found liable.

For example, if a home buyer doesn’t take security measure to secure their computer or accounts, the buyer could be found liable.

In another case, a real estate agent was found liable because the agent forwarded a wire fraud scam to the buyer.

The reality is that only 29% of real estate wire fraud victims fully recover their lost funds. In 40% of cases, just 10% of funds—or less—is recovered.

How to Protect Yourself from Real Estate Wire Fraud

Here at Lilly Title & Settlement, we educate our clients on real estate wire fraud. We tell them how we will and won’t communicate with them. If they have any concern at all about communication with us, we strongly encourage them to contact us for confirmation.

We do not send account information or payment instructions on an unsecured line. And, we do not want you to use email to send any kind of financial information or instructions.

Instead, we have specific communication channels we use. We also have a phone procedure for calling us using a confirmed phone number. This verifies the legitimacy of the wire instructions received by fax or email.

For wire transfer instructions, we use only encrypted emails. Then we verify through email that the wire transfer instructions were received. Further, we verify information and instructions prior to wiring funds on your behalf.

Other ways to protect yourself include:

• An email that says it’s urgent for you to respond. Be suspicious!

• Look for misspellings in the email and emails that are sent after business hours

• If you receive an email that states there’s been a change in payment type, be suspicious!

• If there has been a last minute change in account numbers, be suspicious!

• Confirm everything. DO NOT respond to emails with instructions on wiring money. Check with your lending institution or title company directly first.

• Phone calls are suspect too. If anyone asks you to confirm your identity, end the call.

Everyone involved in your transaction has an investment in it. That’s why all parties must take a proactive stance to protect the transaction.

Real estate wire fraud is a booming business. Work closely with your closing team and your lending institution to keep your money safe!