“That’s when I went into a full panic” Robillard stated in the article published by CNBC’s Hugh Son, as she recounted her emotional experience from January 30th. After what seemed like the final click for finalizing the transaction for the purchase of her new home, Robillard received another payment request…That’s when she realized – she had been scammed. 

In an age where digital transactions are the norm, the dream of owning a home can quickly become a nightmare with just one wrong click. The increased possibility of wire fraud in real estate transactions has become a major headache for closing attorneys, mortgage brokers, and realtors.

Understanding Wire Fraud in Real Estate

Wire fraud in real estate usually includes cybercriminals intercepting or impersonating legitimate communications in order to deceive buyers into paying money to bogus accounts. According to FBI data, losses for this form of fraud have increased dramatically, from less than $9 million in 2015 to $446.1 million by 2022. Robillard’s experience is a striking reminder of the sophisticated methods utilized by fraudsters. After receiving what appeared to be a valid email from her mortgage broker, she unknowingly transferred her down payment to a criminal’s account, resulting in months of financial and emotional hardship.

Common Tactics Used by Cybercriminals

I covered these in depth in my first article but here is a reminder of strategies commonly employed by online threats with a focus on wire fraud:

• Phishing Emails and Spoofed Addresses: Scammers send emails that look to be from trustworthy sources, deceiving recipients into disclosing personal information or transferring payments.
• Fake Websites and Fraudulent Wire Instructions: Criminals use enticing, authentic-looking phony websites and false transfer instructions to divert funds.
  • According to a public service announcement published by the FBI on June 9, 2023 scams involving fraudulent emails in real estate transactions have surged over the previous decade, increasing from less than $9 million in losses in 2015 to $446.1 million by 2022.

Image src: CNBC’s Hugh Son 07/23/24 article and FBI 

• Social Engineering Attacks: Cybercriminals use human psychology to trick real estate agents and buyers into making security mistakes.

Real World Case Studies

Case 1: Intercepted Dreams

Rana Robillard’s ordeal is a thorough illustration of the consequences of wire fraud. She lost over $400,000 on a down payment for her dream home, eventually causing her closing to fail so that she was unable to buy the home. Despite her aggressive efforts to retrieve the money, the process took several months and resulted in extreme stress and frustration. Countless additional cases from the real estate industry show similar patterns of financial loss, emotional pain, and legal obstacles for victims of wire fraud.

In my first article, I referred to the movie The Beekeeper, where Jason Stathom’s character was vigilant for individuals like Robillard. It’s often the crime that is highlighted and not the effect it has on the victim – nor do we realize how much manpower goes into investigating this kind of crime.

Case 2: Too good to be true

A similar case was published by CNBC on October 15, 2020. The Fisher family was just about to buy their $1.4 million home when the husband, Aaron, wired $921,235.10 from his Bank of America account…A moment he still can’t forget. Two days later, the mortgage company called,- and he realized they had been robbed. It was later discovered that hackers had infiltrated the email conversations between the Fishers, the title company, and their real estate agent.

Source: CNBC 

The low number of resolved cases demonstrates the challenge of preventing wire fraud in real estate. According to the American Land Title Association (ALTA), the great majority of wire fraud cases remain unsolved, with only a small fraction successfully handled. According to a CertifID analysis from 2023, more than one in every 20 real estate transactions was subjected to wire fraud efforts, and many victims found it difficult to retrieve their funds due to the intelligence and speed with which the criminals operated. This indicates that while a large number of cases are reported, the actual resolution rate is disappointingly low, stressing the need for enhanced vigilance and stronger security policies within the business.

Best Practices for Cybersecurity in Real Estate Transactions

To prevent wire fraud, real estate professionals and buyers should use the following best practices:

Verify Wire Instructions: Always confirm wire instructions with direct phone calls to known and trusted persons. Do not wire money based on a phone call you have received, unless you’ve made a verified phone call back to the number on record and ensured you reached the correct individual.

Use Encrypted Communication Channels: Ensure that critical information is exchanged over safe, encrypted means.

Regularly Update Passwords and Use Multi-Factor Authentication: Increase security by regularly updating passwords and using multi-factor authentication.

Educate All Parties: Raise knowledge of cybersecurity dangers and warning indications among all parties involved in transactions. Make sure that the buyers are aware of how they are expected to wire money and know to verify the transaction if they get a call or email from someone claiming they need to change the information for the transaction.

Tools and Resources for Enhanced Security

Real estate professionals can use a variety of techniques and resources to improve security, including:

• Cybersecurity Tools and Software: Use modern cybersecurity solutions to defend against phishing and other threats.
• Training and Awareness Programs: Implement regular training sessions to keep employees and clients up to date on the latest cybersecurity best practices.
• Government and Industry Guidelines: Adhere to established guidelines and recommendations from respected organizations such as the National Association of Realtors and the Federal Trade Commission.

The Role of Real Estate Professionals

Real estate agents, brokers, and businesses play critical roles in ensuring cybersecurity. They must take proactive actions to protect their clients, such as adopting strict security procedures and fostering a cybersecurity-aware culture. By addressing cybersecurity, experts may help reduce the risk of wire fraud and ensure safer transactions for all parties involved.

Responding to a Cybersecurity Incident

If wire fraud is suspected, immediate action is essential:

• Stop and Notify: Contact the bank to halt the transaction and notify all relevant parties.
• Report the Incident: Report the fraud to authorities such as the FBI’s Internet Crime Complaint Center (IC3) and local law enforcement.
• Mitigate Damage: Work with banks and cybersecurity experts to recover lost funds and prevent further damage.

Closing Remarks

The necessity of cybersecurity knowledge during real estate transactions cannot be emphasized enough. Wire fraud has serious and far-reaching effects, as Rana Robillard’s and Fisher’s stories demonstrate. We can protect ourselves from cyber risks and adapt to the changing landscape of real estate cybersecurity by remaining aware, educating ourselves and others, and taking proactive measures.

If you’re in the real estate industry and need assistance developing cybersecurity best-practices for your organization, don’t hesitate to reach out to a Managed IT Service Provider like Managed Nerds who has in-house experts ready to support and protect your business.

Victim’s Thoughts

“The banks and real estate companies weren’t even prepared for the old world, how are they going to handle the new one?” Robillard said. “Nobody’s ready for what’s coming.” – Rana Robillard

Source: CNBC

References

Wire Fraud. (2019, July 2). www.nar.realtor. https://www.nar.realtor/wire-fraud

Cybersecurity Checklist: Best Practices for Real Estate. (2017, June 9). www.nar.realtor. https://www.nar.realtor/law-and-ethics/cybersecurity-checklist-best-practices-for-real-estate-professionals

Day, A., Connelly, L., Schlesinger, J., & Zamost, S. (2020, October 15). How one family’s nightmare illustrates the growing threat of real estate wire fraud. CNBC. https://www.cnbc.com/2020/10/15/how-one-familys-nightmare-illustrates-the-growing-threat-of-real-estate-wire-fraud.html

Son, H. (2024, July 23). A Silicon Valley executive had $400,000 stolen by cybercriminals while buying a home. Here’s her warning. CNBC. https://www.cnbc.com/2024/07/23/wire-fraud-in-real-estate-silicon-valley-executive-warning.html

Business Email Compromise: The $50 Billion Scam. (n.d.). https://www.ic3.gov/Media/Y2023/PSA230609

Report: Consumers Lose $106K on Average to Wire Fraud. (n.d.). ALTA.org. https://www.alta.org/news-and-publications/news/20230418-Report-Consumers-Lose-106K-on-Average-to-Wire-Fraud