3 Cyber Crime Protection Steps During a Real Estate Transaction
As we are all aware, cyber crime is real & can cause monumental damage. This short & simple article outlines steps you should take as a consumer during any real estate transaction to protect yourself from exposure. Happy reading!
Three Steps To Protect Yourself From Cybercrime During A Real Estate Transaction
BY Jeff Maas
The ubiquitous presence of technology has without a doubt made our daily lives easier. Smartphones within arm’s reach function as a telephone, calendar, map and music player. Technology tools and software have changed our lives for the better.
But the downside to technology is that thieves and crooks can manipulate it to steal from us. This happens daily across industries, and the real estate business is no exception. The primary scam is simple and takes little effort on the criminal's part. They can swipe up to hundreds of thousands of dollars with a simple fake email — and then you can no longer buy your dream home, because your life savings is gone.
A real estate purchase transaction requires the transfer of funds between parties. The intermediary in the form of escrow or title will hold money for one party or the other until the transaction is closed. The transfer from buyer to escrow or escrow to buyer usually happens in the form of a bank wire transfer.
Criminals know this procedure. They also know how to pretend to be you.
To illustrate, imagine you are buying a house and decide to wire your down payment of $100,000 to the escrow company. The company will give you a copy of its wire instructions and all the bank information you need to complete that task. Unbeknownst to you, the thief — who may live next door or in a foreign country — has obtained illegal access to your agent’s email in a separate earlier scam. The thief obtains an email and domain that is very similar to your agent’s and creates an account and address to mimic the agent's. Next, they send you an email indicating the wire instructions have "changed" and instead you should send the money to a different bank and different account. Believing the email is from your agent, you comply. In a matter of minutes, your $100,000 is sent to the wrong bank and probably gone forever.
The cons are sometimes more elaborate than this, but in most cases, it is really that simple for a cybercriminal to steal your money. Any party involved in the transaction, including but not limited to your agent, can be hacked or impersonated.
Three Steps To Avoid Being Scammed
The silver lining is that the solution, how to avoid falling prey to a scam like this, is just as simple as the crime. It's a low-tech solution that would make Alexander Graham Bell proud. And it only takes three steps:
1. At the opening of escrow, obtain the name and phone number of the escrow officer and your escrow number directly from your officer. It is best to obtain this information in person. If you can’t meet them face to face, have the escrow officer mail, not email, the escrow instructions with this information on it.
2. When it is time for you to wire the money to escrow or title, pick up the telephone and verify all information needed for the money transfer, including the bank name and account. This is an especially necessary step if you receive an email that contradicts previous information. People fall prey to this con regularly, but they don't have to.
3. Avoid sharing any personal information in an email. Remember, this scam began with someone’s email getting hacked. You might want to create a new, paid email account that you use solely for your real estate transaction. Use common sense when using communication methods that may not be completely private or secure — this includes not using unsecured Wi-Fi, ensuring you have strong passwords and exploring the safety of free email services.
A real estate transaction is complicated, and many people blindly follow the advice of their agent. The adage "Trust, but verify" applies here. If it hasn’t happened to you, this scam may seem like it would be easy to see through. But when you’re buying a house and your plans and information are changed daily, a simple email from your agent seems normal and undeserving of intense scrutiny.
The Underlying Issue
A real problem worth noting is that banks are arguably complicit in this scam. The Patriot Act requires banks to verify the sender of a money transfer, but no verification of the recipient is required. When you send a wire transfer, included are the name of the account holder, account number, routing number and more. Often, banks only look at the account number.
If your wire is being sent to ABC Escrow and matches the account number for Bob’s Pizza, "Bob" will be receiving your money. Worse yet, "Bob" may have opened that account the day before with a fake ID and the account could be overdrawn. Banks have no legal liability to confirm the recipient is the intended or named recipient. I believe banks themselves could put a stop to wire fraud by simply verifying the name on the account, but without requirement from The Federal Reserve or Congress to do so, banks will continue along the path of least resistance. Cybercrimes costing thousands of people billions of dollars should be considered a serious crime.
Until corporations and government take this issue seriously, it is left to homebuyers and real estate professionals to fight. Take these precautions and pay attention to the signs of a scam. Technology is a friend, but sometimes friends need boundaries.