Prior to the 2020 arrival of COVID-19, there had already been a steep rise in complaints of cyber-based real estate scams received by the FBI. Now, given the social distancing restrictions that are making face-to-face real estate transactions more difficult to arrange, consumers and businesses should be extra careful and skeptical before handing over personal financial information over the Internet.
Wire Fraud is One of the Fastest Growing Real Estate Scams
One of the fastest-growing cybercrimes in the U.S. is real estate wire fraud. In 2018, more than 11,000 people were victims of wire fraud in the real estate and rental sectors, with combined losses of more than $150 million, according to data collected by the FBI.
From 2015 to 2017, there was an 1100% rise in the number of real estate Business Email Compromise/Email Account Compromise (BEC/EAC) events reported to the FBI by businesses and consumers--with a corresponding 2200% rise in reported monetary losses.
Real Estate Scams Trick Victims into Wiring Money
With BEC/EAC fraud, the perpetrators are able to hack into an email account and assume the identity of the title agent, real estate agent or closing attorney then give the victim new wire instructions, tricking them into depositing funds into the criminal’s bank account. In 2019, there were 11,677 victims of these types of wire fraud crimes, with $221 million in losses.
“The title and settlement industry has improved its digital hygiene and implemented many procedures to combat this fraud,” said Diane Tomb, CEO of the American Land Title Association opens in a new window (ALTA). “But no matter how much money we spend, criminals will continue to target consumers. This is why we must continue to educate people about how they can protect their money when purchasing a home or refinancing a mortgage.”
To raise awareness of the risk consumers face when closing real estate deals, last year ALTA launched the Coalition to Stop Real Estate Wire Fraud. The coalition launched a digital advertising campaign featuring online ads in nine major US markets that delivered more than 22 million ad impressions to potential victims.
Most Real Estate Scams Are Not Being Reported
The FBI reported that they received 467,361 wire fraud complaints in 2019—an average of nearly 1,300 every day—with more than $3.5 billion in losses to individuals and businesses. Shockingly, the FBI estimates these reported crimes represent only 15 percent of all wire fraud incidents. Of the crimes that are reported, "phishing" and similar attempts to trick victims out of their personal financial data, non-payment/non-delivery scams and extortion top the list of crimes.
Number one on the list of complaints that were the most costly to victims financially were those involving business email compromise and confidence fraud-- that is, mimicking the account of a person or business that is familiar to the victim -- to gather personal or financial information.
While email is still the most common target of these criminals, fraud involving text messages—also called "smishing"- is also on the rise, as are "pharming" websites where criminals try to trick web visitors into divulging personal information.
Avoid Wire Fraud and Other Cybercrimes with Due Diligence
Consumers cannot assume a link via text message or a search result on Google is a safe entry point to a trusted website. To avoid being victimized by these real estate scams, it is critical that you be extremely careful and skeptical online. Vet your email contacts thoroughly, and double-check everything. A good rule of thumb is to NEVER follow a link to a website that will require any sensitive personal information from you. Input the web address into your browser manually, to ensure you will arrive at the site you intend to do business with.
Likewise, when you are exchanging sensitive information via email, carefully check email addresses for consistency with prior communications. For example, if you have been doing business with bill.smith@quiktitle and you send financial information in response to an email from bill_smith@quiktitles, you could become the victim of an expensive scam.