Bribery people with dollar bills in hand and quiet gesture photo credit: Getty
Getty
It all started with an email.
Just days before closing on a home, I got a message from my escrow officer—or at least someone pretending to be her. Our closing costs needed to be wired to the title company right away, she said, or our closing date would be pushed back.
Considering the six weeks I’d spent waiting to close on the property—not to mention the disdain I had for our current rental home—the message sent my heart racing.
The font was right. The signature was right. There was even a CC to my real estate agent. But something seemed off.
A closer look at the header revealed the problem. Each email address—one for my agent, one my mortgage broker and one for my escrow officer—was a single character off.
It was a fake.
It Happens All The Time
A thief had tried to steal nearly $60,000—and my dream home—right from under me. But my case was far from unique.
Thousands of unwitting homebuyers fall victim to these fraud schemes every year. And as the industry gets more and more digitized, the number of victims (and their losses) only grows.
According to the FBI, Americans lost nearly $150 million to real estate scams just last year. Scams in the industry have jumped more than 1,000% since 2015, and real estate is now one of the top victims of malware attacks in the country.
In 2017, a Washington, D.C. couple lost $1.5 million in a phishing scam that compromised their title company’s email server. Last year, a Colorado man lost a $56,000 down payment. And just last week, a tech executive lost $260,000. The tales of financial heartbreak go on.
As Viral Shah, co-founder and head of financial products for Better.com explains, “Wire fraud is increasingly a problem for consumers and those in the residential real estate industry. Not only have attempts and incidents increased over the last few years; they continue to be under-reported. In the meantime, attacks have gotten more sophisticated and targeted due to the large amount of money moving in a transaction with multiple parties coordinating with each other.”
Shah actually fell victim to a wire fraud scheme himself, losing $50,000 in the process. It’s just further proof that these attempts aren’t only a danger to consumers—but even experienced industry pros, too.
In 2015, Tom Cronkright, president at Sun Title, also found himself a victim of fraud, losing more than $180,000 on a commercial real estate investment. Though he’s since recovered his money (after testifying before the Department of Justice and taking down part of an African crime syndicate, no less), the fraud left a lasting mark.
His newest venture, CerifID, offers fraud prevention and identity verification solutions. He also speaks about real estate wire fraud across the country, helping educate consumers and industry players on its dangers, how to prevent it and what to do if you fall victim.
The Fraudster Playbook
Cronkright is now an expert on what he calls the fraudster “playbook.” It all starts with the industry’s Multiple Listing Service which, with the help of syndication sites like Zillow and Trulia, directs thieves toward pending home sales. The fraudsters then profile all parties in the transaction (largely using publicly available websites) and attempt to hack one of the email accounts involved.
Once they’re in, they bide their time, watching ongoing correspondence until they can step in and send over false wiring instructions to steal away a down payment, closing costs or mortgage payoff funds.
This is usually done with a spoofed email account, like in my case—one that’s one or two characters off from a trusted party in the transaction.
“This is the playbook—rinse, repeat—nearly every single time we’ve seen across the country,” Cronkright said. “It’s methodical.”
The sheer number of parties involved is part of the problem. Everyone is vulnerable, Cronkright said—attorneys, lenders, agents, title companies, sellers and buyers included.
The losses from these fraud schemes are likely worse than they look, too. According to Cronkright, many victims—especially those on the industry side—are hesitant to report instances of fraud, fearing the reputational impact it could have. He estimates that only 15% of all fraud is actually reported.
When you factor in these unreported cases of fraud, Cronkright said, “It’s north of a $10 billion dollar problem.”