Wire transfers have taken a prominent role in the real estate transaction. With this advent so has fraud. Yes, the thieves have come up with new ways to extricate you from your money. Let’s examine how to prevent wire fraud in your real estate transaction.
Personal check was the standard method
Not all that long ago personal checks were the standard method for acceptance of a real estate offer. However, with the number of “bad” checks, the time it takes for the check to clear, and the accounting involved it becomes too cumbersome. Like evidence in a criminal investigation, there has to be a documented chain of possession. One slip and brokers are at risk of a fine or possibly worse. Can’t have that.
Cashier’s checks are not immune
Cashier’s checks are not immune to fraud either. They still have to be cleared by the banking system which takes time. However, with cashier checks, the funds are considered available immediately. That fact is important in allowing the fraud to happen. Here are a couple of examples of how cashier’s check fraud can occur.
A buyer provides a fraudulent cashier’s check for the initial deposit. It gets deposited; the buyer cancels the transaction the next day asking for the deposit’s return. Escrow sends funds, producing a new check or wire transfer, not knowing the cashier’s check they received yesterday was fraudulent.
A seller receives his proceeds from a sale. Using a smartphone he deposits the check into an account. A short while later, possibly a matter of minutes, the seller shows up at escrow stating he changed his mind, gives the check back and ask for the funds to be wired instead.
Examples like those above have some financial institutions capping the dollar amount of a cashier’s check.
How wire fraud can happen
Wire transfers are now the preferred method of moving funds around. Even this is froth with fraud, but you can protect yourself. First off you need to understand how the fraud can occur.
The scammer gains access to the email account of your broker/agent, escrow company or you. Reading the emails gives the scammer the information they need. They gain access using malware, phishing schemes and a couple of new ones I had not known until I did the research for this blog—vishing (voicemail phishing) and smishing (text message phishing). They track the emails, and when emailed wire instructions appear, they substitute the instructions with new ones changing the routing and account numbers. Money is wired and gone forever, little recourse.
Prevention for Buyers
Buyers in a real estate transaction should take the following precautions involving wire transfers.
1. Wire instructions should only come from your agent or escrow/title.
2. Call the responsible individual. Use a trusted phone number not necessarily the one listed on the instructions.
3. Verbally verify the routing and account numbers listed on the instructions.
4. If calling the agent, ask if they called escrow/title to verify. Don’t worry about their reaction; it is your money.
5. Doing the above should keep your monies safe.
Prevention for Sellers
Sellers in a real estate transaction should take the following precautions involving wire transfers for receipt of their funds.
1. Do not email wire instructions to escrow/title. Carry bank printed instructions with you to the closing and give directly to the escrow officer.
2. Another old fashion way is to fax the instructions to escrow/title if hand delivery is not possible. Verify that the fax was received.
Following the above precautions should prevent wire fraud in your real estate transaction.You need to be vigilant and if anything looks amiss, stop and verify. One other word of advice, make sure that your email can support double verification and use it.