There is a frightening scam rocking the real estate world that you need to know about. It involves sophisticated cyber criminals using email phishing technology to steal from unsuspecting victims at the time of closing. The great news is that the way to stop this from ever happening to you is simple.
Scary Real Estate Scam: The Scenario
Imagine you’ve spent the last decade putting away savings to become a homeowner. You’ve worked two jobs, pinched pennies, and sacrificed vacations and ordinary indulgences. Eventually you have enough money and you find the perfect home. You get a deal under contract and then go through the process of getting a mortgage. That’s stressful, but you get approved.
Finally, it’s the day before closing. You’re excited but also nervous. Because they no longer allow you to get a cashier’s check from the bank, they require you to wire the money to the title company, closing company or attorney; whichever one you’re using. You receive the email with the wiring instructions and follow the instructions. Going to the bank, you wire the money, and voila, you think everything is set.
The Day of Closing
The next morning, you get up, excited because today you’re going to get the keys. The phone rings, or you get an email, and they say they haven’t received the wire. Your confused and think there must be some a delay. Worried, you contact the bank, and the bank tells you that the wire was completed and the money is no longer in your account. So, you call the title company back, and they ask for the instructions and where you sent it. You send it over to them immediately.
Then, to your shock and horror you discover that you are a victim of an email phishing scam. You did wire the money correctly, but you wired it to a professional cyber criminal’s account. The phishing email you received looked like it came from your title company or your closing attorney, but it didn’t. You sent the money to a different account that is untraceable, and that money is never coming back. The FBI can’t help you. A lawsuit can’t help you. It’s gone. Not only is it gone, but you’re not buying that house.
This is REALLY Happening
A couple in Washington DC lost a million dollars this way. A family in Florida lost $77,000, and a man in Oregon lost $123,000. In fact, Fidelity National Title hired the man in Oregon as their spokesperson to warn people because as these criminals continue to be successful, this scary real estate scam is becoming more rampant.
Meanwhile, even though I’m a hard money lender and a real estate investor, I’ve never experienced this problem. I’ve done literally thousands of wires and I do a ton of deals. I even have special accounts where I pay less per wire because of all the volume and I’ve never made a mistake. How do I it?
Don’t Let it Happen to You
Well, that’s the good news. The good news is avoiding this absolute catastrophe is simple. You just call the title company and you verify, over the phone, each digit of the wiring instructions. That’s it. That’s all you need to do.
You might be wondering why everybody doesn’t do this, if it’s so simple. I wondered this as well. I looked at a recent study on communications among millennials, and their least used form of communication is that telephone call. They will email, text, use social media, and every other form of communication before they’ll get on a phone. So, you may not think of it or it might be outside your comfort zone, but if you’re about to wire a considerable down payment, pick up the phone and verify the wiring instructions. Make sure you are speaking with the right title company as well.
Make Sure You Do It Right
This is what I recommend you do when you are buying a home. If you are wiring at the bank:
- Coordinate a time with the title agent so they are available
- Go to the bank and call them up
- Put them on three-way or on speaker phone while you’re meeting with the banker
- Verify the wiring instructions to ensure they are correct
It’s worth the extra three minutes to do it right, because if you do it wrong, you’re potentially not getting it back.
I hope I’ve not only frightened you, but also encouraged you with this warning to be more diligent and avoid this scary real estate scam that is continuing to proliferate. Remember, all you need to do to stop it is to make sure you verify your wiring instructions with your title company over the phone.
I like to share wisdom with you so that you can be on the know of what’s going on in the real estate world. While we’re on this topic of pitfalls, I wrote a book called Real Estate Investing Gone Bad. It’s a series of stories to learn from, and what not to do in real estate. I have a great video that talks more about this as well.