Real Estate Marketing & Beyond
Your hard worked for and long dreamed of home can be gone with a few clicks of a mouse thanks to email hackers that have been stealing closing funds shortly before the deal is consummated. This has become known as the Closing-Cost Scam.
Unfortunately, other than being on the lookout for it, there is little you can do to recover the money once it and your dreams vanish into cyberspace.
For victims, this has involved $10,000, $15,000, $20,000, $25,000 or more that you think is being transferred to a secure escrow account but disappears into the account of a scammer. You might think you’re smarter than these crooks but they rely on all the chaos that goes when closing on a home. Normally astute people get caught up in a ton of emails with attached documents and instructions of what you need to be doing. Almost all of these are legitimate and from people you’ve become comfortable dealing with. Then the scammer jumps in late in the deal with instructions of where to wire your closing funds – to the scammer’s bank account.
Your best defense is to carefully scrutinize the email addresses of your incoming emails. The scammers often use an email account well disguised to look like it is coming from a person you know and trust such as a title company officer or an attorney. The most successful scams actually hack into the email accounts of real estate professionals where the scammer gains access to your financial information such as W-2 forms and the closing paperwork that is being prepared. Keep in mind this isn’t particularly difficult for hackers because real estate professionals make a habit of making email addresses widely available to the public.
Once the email account is hacked into, the scammers can use the real email account to send you a very legitimate appearing email with instructions changing where you should wire the closing funds. The logo, the agent’s name, contact details, the loan number, and the borrower’s name are all in the email and correct. These emails are very convincing.
For the scammers this is better than a bank robbery that nets an average of $6,500. The Closing-Cost Scam doesn’t involve guns or exploding dye packs but can easily net three times that amount. In 2017, the FBI reports that it received a total of 301,580 email scam complaints valued at over $1.4 billion. Of those, the real estate and rental sector made up more than 9,600 victims losing over $56 million. The FBI category for this crime is Business Email Compromise (BEC)/Email Account Compromise (EAC).
There are a few actions you can take to prevent this from happening to you. These might be annoying but there is a lot of money involved and this might be a once in a lifetime occurrence for the home buyer. Whenever you receive money wiring instructions by email be sure to take the time to verify them through another communication source such as a telephone call to the person that you have an established business relationship with. But beware that a fake phone number is probably provided in the scam email. You’re better off using a phone number from a verifiable original document. A few people that are already aware of this scam have taken the extra step of pre-establishing a code word to verify the identity of the people on the phone. This may seem excessive but legitimate changes to established wiring instructions are rare and a request for changes should be a red flag.
If you do become a victim, there is a very short window when you or law enforcement might be able to recover the money. At the most, that window is considered to be 72 hours but the probably of recovery decreases with every minute and hour that the scammer has access to the funds. The scammers quickly move the money to yet a different account to make recovery more difficult. Often the money is spread across multiple accounts or moved internationally.
Notify your bank immediately and request they reverse the transaction. Also call your local FBI office as soon as possible.
Please add your comments and suggestions about how to avoid this email hacking scam. Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.
